Index to Exhibits
at Page 53
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: April 29, 2000
----------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from __ to __
Commission File Number: 0-1653
GENESEE CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 16-0445920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
445 St. Paul Street, Rochester, New York 14605
(Address of principal executive offices) (zip code)
Registrant's Telephone Number, including area code: (716) 546-1030
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: Class B Common Stock
par value $.50 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
The aggregate market value of voting common stock (Class A) held by
non-affiliates, based on the price for Class B Common Stock at the close of
trading on July 14, 2000 was $ 736,544.
The number of shares outstanding of each of the registrant's classes of common
stock as of July 14, 2000 was:
Number of Shares
Class Outstanding
----- --------------
Class A Common Stock (voting) 209,885
par value $.50 per share
Class B Common Stock (non-voting) 1,411,279
par value $.50 per share
1
<PAGE>
PART I
Item 1. Description of Business
General. Genesee Corporation (the "Corporation") was incorporated
in 1932 under the laws of the State of New York. The Corporation functions as a
holding company, with wholly owned subsidiaries that conduct business in the
areas of malt beverage production, dry food processing and packaging, equipment
leasing and real estate investment. Financial information about industry
segments is set forth in Note 9 to the consolidated financial statements set
forth in Item 8 of this report.
CONTINUING OPERATIONS
Food Business. The Corporation's Foods Division produces a variety
of dry food and beverage products, including side dishes, bouillon cubes and
powder, artificial sweeteners, soup mixes, iced tea mixes, instant beverage
mixes and hot cocoa.
The Corporation expanded into the foods business in fiscal 1988,
when it acquired Ontario Foods, a producer of private label dry food and
beverage products. Following a period of internal growth and a series of small
acquisitions, the Corporation acquired Freedom Foods, Inc., the nation's largest
producer of private label bouillon cubes and powder, in May 1997. The
Corporation acquired TKI Foods, Inc., the nation's largest producer of private
label artificial sweeteners, in August 1998.
In October 1998, the Corporation purchased a 340,000 square foot
production facility in Medina, New York to house all Foods Division operations.
During the following months, the Foods Division completed construction of
improvements to the Medina facility to accommodate Foods Division operations. In
January 2000 the Foods Division completed the relocation of all operations to
the Medina facility. The new facility is expected to allow the Foods Division to
operate more efficiently by consolidating all existing operations at a single
location.
Foods Division products are produced by mixing and blending
various dry ingredients and packaging these products in a variety of packaging
configurations, including flexible pouches, cups, cartons, fiber and metal cans
and bulk packaging in fiber drums and polyethylene lined cartons.
Foods Division products are sold by Foods Division salesmen and
through a network of independent brokers to food store chains throughout the
United States as private label products under the label of the food store chain
or as house brands under Foods Division proprietary brand labels. Chain store
private label products are a growing product category in the United States and
represent the largest component of Foods Division revenues.
The Foods Division's proprietary brand labels are Thirst Quench'r,
Taste of the Alps, Sadano's, Golden Kettle, Freedom, Thin & Trim, Sweet 10,
Sprinkle Sweet and Superose. Except for these trademarks, the Foods Division
does not own any trademarks, patents, franchises or concessions which are
material to its business.
The Foods Division also produces and packages dry food and
beverage products under contract processing/packaging arrangements with major
food companies. Contract processing/packaging agreements are typically short
term in nature, terminating with the end of the particular production run. As a
result of the TKI Foods acquisition, the Foods Division also produces and
packages a broad range of products for a small number of large grocery
distributors who in turn sell to retail grocery chains and other food retailers.
The food and beverage products produced by the Foods Division
utilize a variety of ingredients. Some of these ingredients are processed by the
Foods Division from a raw state while others have been pre-processed and are
further processed by the Foods Division to produce the finished product.
Numerous sources of supply are available for the ingredients used in the Foods
2
<PAGE>
Division's products. Packaging materials used by the Foods Division are
purchased from a variety of sources. Products produced under contract
processing/packaging agreements typically utilize ingredients and packaging
supplied by the customer.
The Foods Division's product mix varies on a seasonal basis. For
example, iced tea and beverage mixes are produced in greater quantity in the
spring and summer months whereas bouillon products, dry soup mixes, side dishes
and hot cocoa are typically produced more heavily in the fall and winter months.
The dry food industry consists of thousands of producers ranging
from large multi-national companies with extensive product offerings and
operations, to small specialty producers which serve specific geographic areas
or market niches. The Foods Division competes primarily on the basis of quality,
price and service.
The Foods Divisions major product lines continue to face
competitive pressure. Prolonged price promotion by the leading side dish brand
has resulted in lower sales and operating margins for the Foods Division's side
dish line. The major launch of a new side dish brand in fiscal 2000 has
generated additional competitive pressure on the Foods Division's line of
private label side dishes.
The Foods Division's private label iced tea mix has also
experienced a decline in revenues and margins as a result of aggressive efforts
by a large Canadian sugar refiner to displace the Foods Divisions products in
key supermarket accounts. This Canadian refiner had previously been a supplier
of bulk iced tea mix to the Foods Division but in January 1999 began selling
iced tea mix in retail packages directly to U.S. supermarket chains, in direct
competition with the Foods Division.
The Foods Division's line of private label artificial sweeteners
is facing new competition from the producer of the leading national brand, which
expanded its product line in fiscal 2000 to include private label artificial
sweeteners. The Foods Division has successfully placed its private label
artificial sweeteners line in new accounts to counteract this new competitor.
The accelerating pace of consolidation within the retail food
industry poses another challenge for the Foods Division. This consolidation is
creating bigger, more powerful store chains that have greater buying power,
centralized purchasing and larger geographic scope. One of the objectives of
these consolidations is to exercise greater control over chain store suppliers
like the Foods Division. To remain competitive, the Foods Division will need to
continue to lower its costs, expand its product lines and improve the efficiency
of its distribution network to serve the nationwide operations of these large
chains.
The Foods Division's business strategy is designed to meet these
challenges. With leadership in three major private label categories (side
dishes, bouillon and artificial sweeteners) and nationwide distribution, the
Foods Division is positioning itself to meet this competitive threat. The
Corporation continues to monitor competitive conditions in the private label and
retail food industries to determine whether changes are required to its Foods
Division strategy.
In addition to the governmental regulations common to most
businesses, food processing is regulated by the U.S. Food and Drug
Administration, the U.S. Department of Agriculture, the New York Department of
Agriculture and Markets and a variety of other state and local agencies. These
regulations cover, among other things, ingredients and packaging materials,
product labeling, plant sanitation and processing methods, and disposal of
adulterated or contaminated ingredients or products.
3
<PAGE>
DISCONTINUED OPERATIONS
Malt Beverage Business. The Corporation's malt beverage
business is conducted by its wholly owned subsidiary, The Genesee Brewing
Company, Inc. ("Genesee Brewing Company"). Genesee Brewing Company commenced
brewing at the end of Prohibition in 1933.
On December 16, 1999, Genesee Brewing Company entered into an
agreement to sell substantially all of its assets to the owner of City Brewing
Company. Genesee Brewing Company terminated this agreement on May 1, 2000
because the buyer was unable to satisfy certain conditions set forth in the
agreement. The Corporation's Board of Directors has formed a Special Committee
that is continuing to explore strategic alternatives for the brewing business,
including a proposal for a management-led buyout.
During the fiscal year ended April 29, 2000, Genesee Brewing
Company sold 1,550,000 million barrels of malt beverage products, a decrease of
5.7% over the prior fiscal year. Sales generally are greater in the summer than
in the winter months.
Malt beverage products produced by Genesee Brewing Company are
marketed under the following trademarks: Genesee Beer, Genesee Light Beer,
Genesee Cream Ale, Genesee 12-Horse Ale, Genesee NA, Genny Ice Beer, Genny Red
Lager, Genesee Spring Bock, Koch's Golden Anniversary Beer and Koch's Golden
Anniversary Ice Beer. These brands are referred to in this report as the
"Genesee Core Brands." The Genesee Core Brands contributed 60% of Genesee
Brewing Company's barrel sales in fiscal 2000 and 62% of barrel sales in fiscal
1999.
The product development, sales and marketing of Genesee Brewing
Company's line of craft brands is conducted by a separate division known as
HighFalls Brewing Company. The HighFalls Brewing Company brands are marketed
under the following trademarks: Michael Shea's Irish Amber, Michael Shea's Black
& Tan and JW Dundee's Honey Brown Lager. These brands are referred to in this
report as the "HighFalls Brands." The HighFalls Brands contributed 19% of
Genesee Brewing Company's barrel sales in fiscal 2000 and 23% of barrel sales in
fiscal 1999.
Genesee Brewing Company owns no patents, licenses, franchises or
concessions, except for the trademarks identified above. These trademarks are a
valuable source of product identity for Genesee Brewing Company brands.
Genesee Brewing Company also produces malt beverage products under
a contract with Boston Beer Company. The contract between Genesee Brewing
Company and Boston Beer Company extends through the year 2016 but either party
may terminate the contract without cause after giving the other party between
one and four years' prior notice of termination. The duration of the
notification period is based on the volume of product produced under the
contract in the twelve months preceding the notice of termination -- the greater
the volume, the longer the notification period required. In fiscal 2000, Genesee
Brewing Company produced 323,000 barrels for Boston Beer Company. Sales to
Boston Beer Company accounted for 21% of Genesee Brewing Company's barrel sales
in fiscal 2000 and 15% of barrel sales in fiscal 1999.
Except in Monroe County, New York, where Genesee Brewing Company
sells its products directly to retailers, beer and ale are sold to approximately
280 independent wholesale distributors. Through this distribution system, malt
beverages produced by Genesee Brewing Company are resold to retailers in
thirty-seven states and the Canadian province of Ontario. Sales to distributors
located in New York, Pennsylvania and Ohio accounted for approximately 77% of
Genesee Brewing Company's sales in fiscal 2000 and 74% in fiscal 1999.
Genesee Brewing Company's sales and marketing organization
consists of advertising, marketing, sales, graphics design, merchandising, sales
administration and field sales personnel. These sales personnel work with the
independent distributors to stimulate sales in each distributor's territory.
4
<PAGE>
The brewing industry in the United States is mature and highly
competitive. The domestic brewing industry is dominated by three brewers
(Anheuser-Busch, Miller Brewing Co. and Coors Brewing Co.) whose brands
accounted for approximately 80% of the beer and ale sold in the United States in
1999. Genesee Brewing Company brands accounted for less than 1% of the beer sold
in the United States in 1999. Genesee Brewing Company's relative position in the
domestic brewing industry in terms of annual barrel sales is believed to be
fifth.
Genesee Brewing Company competes with more than 100 companies that
produce, import or market malt beverage products in the United States. Genesee
Brewing Company's products compete with nationally distributed brands,
regionally and locally distributed brands, microbrewed brands, contract brewed
brands and imported brands. Genesee Brewing Company products compete on the
basis of advertising, taste, quality, packaging, pricing and/or promotion,
depending on the competitive brand strategy and the particular market involved.
Although all brands compete against each other in the overall market, specific
brands compete primarily with other brands that are positioned in the same
product category. The product categories that are generally recognized in the
United States are super-premium priced, premium priced, regional or popular
priced, malt liquor, craft/specialty, alternative/flavored malt beverage and
import categories. The Genesee Core Brands generally compete in the regional and
popular priced categories. Depending on the particular market, the HighFalls
Brands compete in the premium, craft/specialty or super-premium category.
Overall consumption of malt beverage products in the United States
has increased only slightly in recent years and demand for many established
domestic brands has declined as consumers turned to nationally advertised light
beers, imported brands and a variety of alternative/flavored malt beverage
products such as hard lemonade. As has been the case for several years, the
Genesee Core Brands continue to experience declining volume; declining 9% in
fiscal 2000 and 12% in fiscal 1999.
As a result of these trends and the excess capacity that exists in the
industry, brewers have attempted to gain market share through pricing
promotions, intensive marketing and promotional programs, new product
introductions and innovative packaging. Intense price competition has prevented
any meaningful price increases during the past several years, particularly in
Genesee Brewing Company's core markets. In addition, the industry has seen
increased levels of price discounting and price promotions and a growth in
popularity of value priced 30 can Multipaks.
The competitive position of smaller brewers like Genesee Brewing
Company has also been adversely affected by the consolidation that is occurring
within the distribution tier of the brewing industry. The National Beer
Wholesalers Association estimates that the number of beer wholesalers in the
United States declined by 14% between 1992 and 1997. The effects of this
consolidation have been aggravated by the aggressive efforts of the large
national brewers to obtain an increasing share of the distributor's time and
attention devoted to their brands. During the past several years, the large
national brewers have implemented a wide range of inducements, incentives and
contractual terms to cause their distributors to make a greater commitment to
their brands, largely at the expense of the brands of smaller brewers, like
Genesee, that are also sold by these distributors. Many markets are now served
by two or three beer distributors which generate the majority of their volume
and revenue selling national or imported brands. These developments have made it
increasingly difficult for Genesee Brewing Company to effectively promote and
sell its brands in its core markets and to expand sales of its products in new
or lower share markets.
After a period of rapid growth during the early 1990's, growth of
the craft/specialty category slowed dramatically in 1997 and the category
experienced a decline in volume over the next several years. The large national
brewers have entered the category with craft-style products of their own or by
acquiring ownership interests in existing craft/specialty brewers. In addition,
the growing popularity of imported malt beverages indicates that consumers
willing to purchase higher priced beer are showing a preference for imports at
the expense of craft and specialty brands. Although the craft/specialty category
appears to have stabilized in the past year, the Corporation does not expect the
category to experience any meaningful growth and the Corporation expects that
competitive pressures in the category will continue. Sales of the HighFalls
Brands declined 22% in fiscal 2000 and 12% in fiscal 1999.
5
<PAGE>
The competitive conditions in the brewing industry that are
impacting the performance of Genesee Brewing Company are not expected to abate
in the near term. In response to these conditions, Genesee Brewing Company
implemented on aggressive cost reduction program in fiscal 2000, including a 22%
reduction in employment. In addition, Genesee Brewing Company has postponed
plans to expand distribution into additional states and is proceeding more
slowly with plans to add new brands to its product line. Genesee Brewing Company
is focusing its resources on stabilizing sales and improving trends for its
current brand portfolio in existing markets.
Management is exploring further opportunities to reduce costs,
improve efficiencies and rationalize the Corporation's brewing business. Genesee
Brewing Company is also seeking to attract additional contract brewing volume.
Additional contract brewing would improve Genesee Brewing Company's capacity
utilization. The Corporation also continues to explore long-term strategic
alternatives for its brewing business, acknowledging that the brewing industry
has undergone fundamental change during the past ten years and is now dominated
by large, global players whose resources dwarf those of Genesee Brewing Company.
Beer and ale products are produced from barley malt, water, hops,
yeast and other brewing grains and ingredients. Genesee Brewing Company uses the
Krausen process in the brewing of beer. This process produces natural
carbonation by the addition of a small amount of beer in the early stages of
fermentation to fermented beer at the beginning of the aging process. Variations
in flavor, appearance and aroma are achieved by changing the proportions and
types of brewing ingredients, modifying the brewing process, using different
strains of yeast in the process of fermentation and altering the aging period.
Genesee Brewing Company purchases all of its requirements for
glass bottles in which beer and ale are packaged from one source. Genesee
Brewing Company is not under any contractual obligation to limit purchases to
this supplier. Consolidation in the glass industry in North America has reduced
the number of glass bottle suppliers available to Genesee Brewing Company so
alternative sources for bottles might not be readily available if the current
supplier is unable to supply Genesee Brewing Company's requirements.
Genesee Brewing Company purchases all of its requirements for
aluminum cans from a single supplier under an agreement which runs through
December 2003. This supplier has multiple plants which are qualified to produce
cans for Genesee Brewing Company. If the current supplier was unable to supply
Genesee Brewing Company's requirements, alternative sources for aluminum cans
might not be readily available. The cost of aluminum cans decreased slightly in
fiscal 2000 because economic difficulties in South America, Japan and Asia
reduced global consumption.
Fiber board and chipboard used for secondary packaging of glass
bottles and aluminum cans (e.g., 6-pack baskets, 12-pack wraps, etc.) are
purchased from single sources to maintain compatibility with packaging equipment
used by Genesee Brewing Company. A second source for baskets has been tested and
approved. A second source for wraps might not be readily available.
Corrugated packaging used for 24-can trays is purchased from two
suppliers and corrugated packaging for the 24-pack carton is purchased from a
single supplier. Genesee Brewing Company is not under any contractual obligation
to limit purchases of corrugated packaging to these suppliers and additional
sources for these packaging materials are readily available.
Genesee Brewing Company has an agreement to purchase virtually all
of its requirements for barley malt from a single supplier. This agreement runs
through December 2001. Alternative sources for barley malt are readily
available, subject to the possibility of shortages which may affect the entire
commercial malting industry. Specialty malts used in craft products are
purchased from a single supplier and additional sources for specialty malts are
readily available.
Genesee Brewing Company purchases corn grits on the open market
from four suppliers and is not under any contractual commitment with any of
these suppliers. Prices for corn grits are determined by the commodity futures
market.
6
<PAGE>
The price, quality and availability of agricultural ingredients
used in the brewing process are affected by weather and other climatic
conditions in the regions where these ingredients are grown. The 1999 growing
season was favorable for both quality and yields for corn. As a result, there
was adequate supply and prices for corn products were substantially lower in
fiscal 2000. Yields and quality of the 1999 barley crop were lower than 1998,
which resulted in higher prices for barley malt during the second half of fiscal
2000.
The price, quality and availability of agricultural ingredients
for the remainder of fiscal 2000 should be determined by climatic conditions
during the 2000 growing season. To date, conditions have been favorable in the
regions where agricultural ingredients used by Genesee Brewing Company are
grown.
A substantial portion of Genesee Brewing Company's requirements
for hops is purchased on a contract basis two to three years in advance of
harvest. These contracts are firm with respect to quality, price and variety.
The balance of hops requirements is purchased as needed on the open market.
In addition to the governmental regulation common to most
businesses, Genesee Brewing Company is regulated by the U.S. Treasury
Department's Bureau of Alcohol, Tobacco and Firearms, the U. S. Food and Drug
Administration, the New York State Liquor Authority, the New York Department of
Agriculture and Markets and the state alcohol beverage control agencies in each
state in which its products are sold. These regulations cover, among other
matters, collection of federal and state taxes, physical changes in plant and
other operating facilities, types of credit allowed, reporting and changing
prices, sales promotion, advertising and public relations, labeling and
packaging, changes in officers and directors, investigations of employees, and
distribution methods and relationships.
Seven states where Genesee Brewing Company products are sold (New
York, Vermont, Maine, Connecticut, Massachusetts, Michigan and Delaware) require
consumers to pay a deposit on containers. The United States Congress and several
other states in which Genesee Brewing Company products are sold have, from time
to time, considered legislation that would require a deposit on containers,
impose special taxes on non-refillable containers or non-biodegradable packaging
materials, or require hazard warnings to be included in advertising or posted at
retail outlets.
Although Genesee Brewing Company has facilities for removing
certain solid waste materials from effluent discharged by its Rochester, New
York brewing plant, the effluent is discharged into the Rochester Pure Waters
District sewage system for further treatment. An agreement with the Rochester
Pure Waters District provides that Genesee Brewing Company will make annual
surcharge payments to the District which fluctuate with production levels and
may vary according to effluent content. In fiscal 2000, a surcharge of
approximately $253,000 was paid in addition to the normal sanitary and combined
sewage charge for the year of approximately $576,000.
In response to state regulations that went into effect in December
1999 that would have required Genesee Brewing Company to make significant
capital expenditures to modify the brewery's system for storing and handling
chemicals used to clean and sanitize brewing equipment and refillable bottles,
Genesee Brewing Company modified certain operations and is changing the
chemicals used with the system to exempt the system from the regulations.
Other Businesses. The Corporation's equipment leasing business is
conducted by a joint venture known as Cheyenne Leasing Company ("Cheyenne"),
which is 85% owned by the Corporation's Genesee Ventures, Inc. ("Genesee
Ventures") subsidiary.
In August 1999, the Corporation approved a plan to wind down its
equipment leasing business. Under this plan, Cheyenne Leasing Company ceased
funding new leases on December 31, 1999. On June 28, 2000, the Corporation
announced that Cheyenne had entered into an agreement in principle to sell a
significant portion of its lease portfolio under which Cheyenne would retain and
continue to manage the leases in its portfolio that expire prior to May 1, 2001.
The sale is subject to a number of contingencies customary to such transactions,
including satisfactory due diligence and negotiation of a definitive agreement.
7
<PAGE>
Prior to the cessation of new lease funding, Cheyenne Leasing
Company financed during fiscal 2000 leases involving equipment having an initial
cost of approximately $380,000, down from $14.2 million of new lease volume in
fiscal 1999. Cheyenne's total lease portfolio as of April 29, 2000 included 219
leases representing an initial equipment cost of approximately $101.2 million.
The Corporation's real estate investment activities are conducted
by three subsidiaries of Genesee Ventures. One subsidiary owns a ten-percent
interest in a Class A office building in Rochester, New York. The second
subsidiary owns a fifty-percent interest in a 408-unit residential property
located in a suburb of Syracuse, New York. The third subsidiary owns a
fifty-percent interest in a 150-unit residential property located in a suburb of
Rochester, New York.
Genesee Ventures has not made a new real estate investment since
1995. Given the less liquid nature of real estate investments and the
Corporation's changing cash needs, there are no plans for Genesee Ventures to
make any additional real estate investments in the foreseeable future.
Employees. As of April 29, 2000, the Corporation and its
subsidiaries employed 627 people. Genesee Brewing Company employed 427 people,
approximately 300 of whom are represented by six separate unions whose
collective bargaining agreements generally conform to those of the brewing
industry. Employee relations with Genesee Brewing Company's employees have been
good. The Foods Division employed 200 people, none of whom are represented by a
union. Employee relations with the Foods Division's employees have been good.
Item 2. Properties
CONTINUING OPERATIONS
Food Processing Operations. The Foods Division owns a 340,000
square foot facility in Medina, New York that houses all of the operations.
Since being acquired in October 1998, this facility has been extensively
modified to accommodate all office, production, laboratory and warehousing
requirements of the Foods Division. The Medina facility is encumbered by a
mortgage given to secure financing to acquire the property.
The Foods Division has production equipment for mixing and
packaging of food products. This equipment is in generally good condition, is
regularly maintained and upgraded and is comparable to that used in the
industry.
The Medina facility and related equipment are adequate and
suitable for the current needs of the Foods Division and the Medina facility has
adequate space to accommodate additional operations.
DISCONTINUED OPERATIONS
Brewing Operations. Genesee Brewing Company's brewing, bottling,
racking, storage, shipping, branch distribution, garage, office and maintenance
facilities are situated in Rochester, New York on approximately 26 acres of
land.
The original brewing building in Rochester is approximately 100
years old and is of stone construction. A second brewhouse was built in 1980.
Genesee Brewing Company's other buildings in Rochester are of concrete block,
steel or metal construction and have been constructed since 1932, except for
certain warehouse and distribution facilities which are about 85 years old.
Based on current product and package mix, these facilities give Genesee Brewing
Company capacity for producing approximately 3,500,000 barrels of beer and ale
per year. If demand warranted, Genesee Brewing Company could implement further
phases of a plant expansion plan which, based on current product and package
mix, could achieve a total annual capacity of approximately 6,000,000 barrels.
Production equipment is upgraded or added as needed and is comparable to that
used in the industry.
8
<PAGE>
All of the properties described above are owned free and clear of
any mortgages or other encumbrances. The Corporation considers the above
properties and equipment to be in generally good condition and suitable for the
conduct of its business.
Genesee Brewing Company owns and operates a fleet of 9 delivery
trucks, 9 tractors and 15 trailers used to transport beer to customers. Genesee
Brewing Company also owns or leases 56 automobiles used by salesmen and
executives and 11 pick-up trucks and vans.
Other. The Corporation's Genesee Ventures subsidiary has interests
in three real estate investments which are described in the Other Businesses
section of Item 1 of this report. Each real estate investment is owned by a
separate subsidiary of Genesee Ventures in partnership with a real estate
investment and management company.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
------ ---------------------------------------------------
There were no matters submitted to a vote of security holders
during the fourth quarter ended April 29, 2000.
9
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters
The Corporation's Class B Common Stock trades on the NASDAQ
National Market tier of the NASDAQ Stock Market under the symbol GENBB. As of
June 26, 2000, the number of holders of record of Class A (voting) Common Stock
and Class B (non-voting) Common Stock were 119 and 950, respectively. There is
no established public trading market for the Corporation's Class A stock, which
has generally traded within the same range as Class B stock. The price for the
Class B stock as reported by NASDAQ and the dividends paid per share on Class A
and B stock for each quarter for the past two years are shown below:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
UNAUDITED FISCAL YEAR ENDED APRIL 29, 2000 FISCAL YEAR ENDED MAY 1, 1999
Market Price Market Price
High Low Dividends High Low Dividends
------------------------------------------------------------------------------------------
First Quarter $ 26 5/8 20 1/3 .35 $ 38 3/8 311/2 .35
Second Quarter 26 19 4/7 .35 34 19 5/8 .35
Third Quarter 29 1/8 19 3/4 .35 26 5/8 22 3/8 .35
Fourth Quarter 23 17 1/2 .35 23 1/2 19 5/8 .75
------------------------------------------------------------------------------------------
</TABLE>
Dividends paid in any year are determined by the Corporation's Board of
Directors based on earnings, capital requirements and the overall financial
condition of the Corporation.
Item 6. Selected Financial Data
<TABLE>
<S> <C> <C> <C> <C> <C>
Years Ended 4/29/00 5/1/99 5/2/98 5/3/97 4/30/96
--------------------------------------------------------------------------------
Net Revenues From Continuing
Operations $ 45,548 44,893 35,358 26,031 21,814
Net (Loss)/Earnings From Continuing
Operations (1,141) 920 2,430 1,421 2,213
Net (Loss)/Earnings From
Discontinued Operations (2,259) 1,543 (1,095) 1,925 1,108
Total Assets 95,771 143,953 135,589 136,929 134,035
Total Long Term Debt 6,273 4,761 - - -
Basic (Loss)/Earnings Per Share
From Continuing Operations (.70) .57 1.50 .88 1.37
Basic (Loss)/Earnings Per Share
From Discontinued Operations (1.40) .95 (.67) 1.19 .69
Diluted (Loss)/Earnings Per Share
From Continuing Operations (.70) .57 1.49 .87 1.37
Diluted (Loss)/Earnings Per Share
From Discontinued Operations (1.40) .95 (.67) 1.19 .68
Cash Dividends Per Share 1.40 1.80 1.80 1.80 1.80
--------------------------------------------------------------------------------
</TABLE>
(Dollars in thousands, except per share data)
10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This financial review should be read in conjunction with the
accompanying consolidated financial statements and contains management's
discussion and analysis of the Corporation's results of operations and
liquidity. The discussion of operating results and liquidity and capital
resources for fiscal 2000, fiscal 1999, and fiscal 1998 excludes the
discontinued brewing, equipment leasing, and real estate investment businesses
discussed in Note 2 of the accompanying consolidated financial statements.
Summary Consolidated net revenues from continuing operations for the
fiscal year ended April 29, 2000 were $45.5 million compared to $44.9 million in
fiscal 1999 and $35.4 million in fiscal 1998. The increase in net revenues from
continuing operations was due to increased sales volume by the Corporations
Foods Division, which increased significantly during fiscal 1999 as a result of
the purchase of TKI Foods, Inc.
On a consolidated basis, the Corporation reported an operating loss
from continuing operations of $1.7 million for fiscal 2000 compared to operating
income of $752,000 for fiscal 1999 and operating income of $1.4 million for
fiscal 1998. The decrease of approximately $2.4 in operating income between
fiscal 2000 and fiscal 1999 was largely due to a $1.2 million charge during
fiscal 2000 related to execution of a severance agreement with the Corporation's
former CEO and approximately $2.1 million in Foods Division transition costs
related to the movement of all production to the Medina, New York facility.
These amounts were offset by a reduction of approximately $1.3 million in
administrative costs related to the acquisition of TKI Foods, Inc. during fiscal
1999 that were not duplicated in fiscal 2000.
On a consolidated basis, the Corporation reported a loss from
continuing operations of $1.1 million, or $.70 basic and diluted loss per share,
for fiscal 2000, compared to earnings from continuing operations of $920,000, or
$.57 basic and diluted earnings per share, for fiscal 1999, compared to earnings
from continuing operations of $2.4 million, or $1.50 basic and $1.49 diluted
earnings per share, for fiscal 1998. This decrease in earnings from continuing
operations is primarily related to the items mentioned in the previous
paragraph.
The Corporation reported a net loss from discontinued operations of
$399,000, net of a tax benefit of $142,000, or $.25 basic and diluted loss per
share for fiscal 2000, compared to net earnings from discontinued operations of
$1.5 million, net of tax expense of $1.0 million, or $.95 basic and diluted
earnings per share for fiscal 1999, compared to a $1.1 million net loss from
discontinued operations, net of a tax benefit of $645,000, or $.67 basic and
diluted loss per share for fiscal 1998. As a result of the decision by Cheyenne
Leasing Company to sell its equipment lease portfolio the Corporation also
reported a loss on disposal in fiscal 2000 in the amount of $1.9 million, net of
a tax benefit of $1.2 million and including a provision of $543,000 for
operating income during the phase-out period, or $1.15 basic and diluted loss
per share.
Results of Continuing Operations (Fiscal 2000 vs. Fiscal 1999)
Foods Division
Net sales for the Corporation's Foods Division increased $600,000
to $45.5 million in fiscal 2000 as compared to $44.9 million in fiscal 1999. The
increase in net sales was primarily attributable to an additional $500,000 in
revenue from a new packaging contract.
Gross profit for the Foods Division decreased $1.9 million to $6.1
million in fiscal 2000, compared to $8.0 million in fiscal 1999. The decrease in
gross profit was primarily the result of $1.9 million of costs incurred by the
Foods Division during fiscal 2000 in transitioning production to the Medina, New
York facility that was acquired in fiscal 1999.
11
<PAGE>
Selling, general and administrative expenses decreased $600,000 in
fiscal 2000 compared to fiscal 1999. This decrease is primarily the result of
the elimination of duplicate staffing costs incurred in connection with the
acquisition of TKI Foods and Spectrum Foods during fiscal 1999.
The Foods Division had an operating profit of $190,000 in fiscal
2000, which was $1.4 million less than the $1.6 million operating profit
reported in fiscal 1999. Foods Division profitability in fiscal 2000 was
adversely impacted by the reasons identified above. The Foods Division has
completed the consolidation of all operations at the Medina facility.
Consolidation of all operations at a single location is expected to generate
significant cost savings for the Foods Division.
See also Item 1 of this Report for information regarding known
trends and uncertainties affecting the Foods Division, which is incorporated
herein by reference thereto.
Results of Continuing Operations (Fiscal 1999 vs. Fiscal 1998)
Foods Division
Net sales for the Corporation's Foods Division increased $9.5
million to $44.9 million in fiscal 1999 as compared to $35.4 million is fiscal
1998. The increase in net sales was primarily attributable to $12.8 million in
sales of artificial sweeteners and other private label food products of TKI
Foods, Inc. and Spectrum Foods, Inc., which were acquired by the Corporation
during the second quarter of fiscal 1999. The increase in net sales attributable
to the TKI Foods and Spectrum Foods acquisitions was partially offset by the
loss of $2.3 million in net sales from a one-time government soup contract that
was completed in fiscal 1998. The Foods Division did not aggressively seek to
replace this contract manufacturing business, instead devoting resources to its
core retail private label business and the relocation and integration of TKI
Foods and Spectrum Foods business into the Foods Division.
Also partially offsetting the increase in net sales was the loss
of $1.5 million of ice tea mix sales in fiscal 1999 as compared to fiscal 1998.
Some of the Foods Division's retail chain store customers shifted their iced tea
purchases to a Canadian sugar refiner that is seeking to aggressively expand its
share of the United State's private label iced tea mix market. This Canadian
supplier, which controls a large percentage of the U.S. tariff rate quota for
imported products, offered extremely low prices to Foods Division iced tea mix
customers to draw their iced tea mix business away from the Foods Division.
Management believes certain actions by the Canadian sugar refiner violates the
United States trade laws. The Corporation is seeking relief from these trade
practices through appropriate government channels. In addition to sales lost
when Foods Division customers shifted their iced tea mix to the Canadian sugar
refiner, the Foods Division also had to significantly reduce its prices for iced
tea mix to its other iced tea mix customers to retain their business, which
further eroded iced tea mix revenues and profit margins in the third quarter.
Gross profit for the Foods Division increased $2.5 million to $8.0
million in fiscal 1999, compared to $5.5 million in fiscal 1998. The increase in
gross profit was comprised of $3.5 million in gross profit contributed by TKI
Foods and partially offset by lower margins realized by the Foods Division's
other product lines.
Selling, general and administrative expenses increased $3.0
million in fiscal 1999 compared to fiscal 1998. This increase is primarily the
result of additional costs incurred in connection with the acquisition of TKI
Foods and Spectrum Foods.
The Foods Division had an operating profit of $1.8 million in
fiscal 1999, which was $419,000 less than the $2.2 million operating profit
reported in fiscal 1998. Foods Division profitability in fiscal 1999 was
adversely impacted by approximately $436,000 in costs associated with owning the
facility in Medina, New York that the Foods Division acquired in October 1998
and approximately $346,000 in costs arising from transitioning the TKI Foods
business from Springfield, Illinois to the Medina facility.
See also Item 1 of this Report for information regarding known
trends and uncertainties affecting the Foods Division, which is incorporated
herein by reference thereto.
12
<PAGE>
Liquidity and Capital Resources (from continuing operations)
Cash and cash equivalents and marketable securities increased $1.8
million from May 1, 1999 to April 29, 2000. Cash and cash equivalents totaled
$7.6 million at April 29, 2000 and $5.8 million at May 1, 1999. Marketable
securities totaled $8.0 million at April 29, 2000 and May 1, 1999.
Net trade accounts receivable decreased by $7.4 million, of which
$6.6 million relates to the discontinued brewing business which is included in
the balance at May 1, 1999. The decrease of $860,000 from the May 1, 1999
balance is primarily attributable to timing of sales volume at the Foods
Division.
Inventories decreased by $7.2 million, of which $5.3 million relates
to the discontinued brewing business and is included in the balance at May 1,
1999. The remaining $1.9 million decrease in inventories is the result of a
concerted effort by the Foods Division to reduce inventory levels.
Net property, plant and equipment decreased by $24.4 million, of
which $27.0 million relates to the discontinued brewing business which is
included in the balance at May 1, 1999. The remaining increase of $2.6 million
from May 1, 1999 to April 29, 2000 is primarily a result of capital additions to
the Foods Division facility in Medina, New York as well as other Foods Division
acquisitions of property, plant and equipment being offset by normal
depreciation and amortization of such assets.
Other assets decreased by $2.0 million, of which $2.2 million relates
to the discontinued brewing and leasing, real estate and investment businesses
which is included in the balance at May 1, 1999. The remaining increase of
$200,000 is due to a variety of insignificant account balance changes.
Current liabilities decreased $18.1 million, of which $14.4 million
relates to the discontinued brewing, equipment leasing and real estate
investment businesses which is included in the balance at May 1, 1999. The
remaining $4.3 million decrease in current liabilities is the result of the
satisfaction of the $3.0 million line of credit that was paid down in the third
quarter of fiscal 2000, $600,000 less in accounts payable due to timing of
payments, $1.1 million less in income taxes payable due to significant estimated
tax payments being made during the second quarter of fiscal 2000, and $1.4
million less in accrued compensation and other accrued expenses due to certain
accrued amounts related to the acquisition of TKI Foods, Inc. having been paid
off during the first three quarters of fiscal 2000, offset by approximately $2.1
million of discontinued operations balance sheet reclassifications related to
net liabilities held for disposal.
Notes payable increased $1.5 million net of repayments due to the draw
down of funds on a multiple disbursement term note used to fund the renovation
of the Foods Division's new facility in Medina, New York.
Deferred income tax liabilities, noncurrent portion, decreased $7.9
million, of which $12.4 million relates to the discontinued equipment leasing
and real estate investment businesses which is included in the balance at May 1,
1999.
The Corporation is re-evaluating its capital resources in light of
its decision to divest its brewing business and the decision to wind down and
divest of its equipment leasing business. Until this evaluation is completed,
the Corporation is not actively searching for new acquisition opportunities for
its Foods Division, instead devoting resources to internal development of new
private label products and extensions of existing product lines.
In connection with the decision to divest its brewing business and
the wind down and divestiture of its equipment leasing business, the Corporation
is evaluating its projected cash flows, capital resources and liquidity
requirements. As part of this assessment, the Corporation's Board of Directors
is reviewing the Corporation's dividend policy to determine whether shareholder
value would be enhanced by a change in the Corporation's current dividend
policy.
13
<PAGE>
See also the information in Item 1 regarding known trends and uncertainties in
the Corporation's businesses, which is incorporated herein by reference thereto.
YEAR 2000
The year 2000 issue was the result of computer hardware and
software systems and other equipment with embedded chips or processors that used
only two digits rather than four to represent the year. Time-sensitive software
could have recognized a date using "00" as the year 1900 rather than 2000. These
systems could have failed to operate or could have been unable to process data
accurately as a result of this flaw. The year 2000 issue could have arisen at
any point in the supply chain, manufacturing process, distribution channels or
information systems of the Corporation, its subsidiaries and third parties with
which it does business.
The Corporation assembled a task force and developed a formal plan
to ensure that all of its significant date-sensitive computer software and
hardware systems and other equipment utilized in its various manufacturing,
distribution and administration activities would be Year 2000 compliant and
operational on a timely basis. The plan also included an assessment process to
determine that the Corporation's significant customers and suppliers would also
be Year 2000 compliant.
The Corporation utilized both internal and external resources to
achieve Year 2000 preparedness. The total cost to the Corporation and its
subsidiaries for Year 2000 preparedness was approximately $1.7 million. The
Corporation and its subsidiaries encountered no difficulties associated with the
Year 2000 issue and did not have to activate any of their Year 2000 contingency
plans. The Corporation does not anticipate any substantive problems related to
this issue going forward.
14
<PAGE>
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning
of the federal securities laws. These forward-looking statements may include
statements about the operations and prospects for the Corporation and its
subsidiary businesses, and statements about industry trends and conditions that
may affect the performance or financial condition of the Corporation and its
subsidiary businesses. These forward-looking statements involve significant
risks and uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements. The most important factors
that could cause actual results to differ from the expectations stated in these
forward-looking statements include, among others, the inability to implement
strategic alternatives to address the declining sales and operating losses
reported by the Genesee Brewing Company; the inability of Genesee Brewing
Company and its distributors to develop and execute effective marketing and
sales strategies for Genesee Brewing Company's products; the potential erosion
of sales revenues and profit margins through continued price stagnation,
increased discounting or a higher proportion of sales in lower margin Multipaks;
the continued lack of meaningful growth in the craft/specialty beer category or
a resumption of the decline in sales for the category; uncertainties due to
intense competition in the beer industry; demographic trends and social
attitudes that could reduce beer sales; the continued growth in the popularity
of import and nationally advertised beers; increases in the cost of aluminum,
packaging and other raw materials; the Corporation's inability to maintain
manufacturing and overhead costs for its brewing and foods businesses at
competitive levels; changes in significant laws and government regulations
affecting sales, advertising and marketing of malt beverage products;
significant increases in federal, state of local beer or other excise taxes; the
potential impact of beer industry consolidation at both the brewer and
distributor levels; a shift in consumer preferences away from store-brand,
private label food products; increased competition from branded food producers
that could adversely affect sales of private label products; the possibility
that branded food producers will expand their product lines to include private
label products that could displace the Foods Divisions products in key accounts;
the potential impact of consolidation in the retail supermarket industry that
could adversely affect the Foods Division's ability to maintain or expand its
existing customer base; an economic slowdown or recession that could increase
the credit risk associated with Cheyenne Leasing Company's lease portfolio; and
the possibility that Cheyenne Leasing Company may not achieve the residual value
projected for equipment coming off leases as Cheyenne's lease portfolio matures.
15
<PAGE>
Item 8. Financial Statements and Supplementary Data
Selected Quarterly Financial Data (Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C>
First Second Third Fourth Total
Fiscal Year Ended 4/29/00 Quarter Quarter Quarter Quarter Year
--------------------------------------------------------------------------------
Net Revenues From Continuing
Operations $ 10,483 $ 12,518 $ 11,786 $ 10,761 $ 45,548
Gross Profit From Continuing
Operations 840 1,760 1,995 1,532 6,127
Net (Loss)/Earnings From
Continuing Operations (643) 77 407 (982) (1,141)
Net Earnings/(Loss) From
Discontinued Operations 1,169 (1,549) (105) (1,774) (2,259)
Basic (Loss)/Earnings Per
Share From Continuing (.40) .05 .25 (.60) (.70)
Operations
Basic Earnings/(Loss) Per
Share From Discontinued .72 (.96) (.06) (1.10) (1.40)
Operations
Diluted (Loss)/Earnings Per
Share From Continuing (.40) .05 .25 (.60) (.70)
Operations
Diluted Earnings/(Loss) Per
Share From Discontinued .72 (.96) (.06) (1.10) (1.40)
Operations
--------------------------------------------------------------------------------
First Second Third Fourth Total
Fiscal Year Ended 5/1/99 Quarter Quarter Quarter Quarter Year
--------------------------------------------------------------------------------
Net Revenues From Continuing
Operations $ 6,495 $ 13,788 $ 11,691 $ 12,919 $ 44,893
Gross Profit From Continuing
Operations 492 3,211 2,498 1,838 8,039
Net Earnings From Continuing
Operations 165 508 240 7 920
Net Earnings/(Loss) From
Discontinued Operations 967 (1,094) 1,511 159 1,543
Basic Earnings Per Share From
Continuing Operations .10 .31 .15 .01 .57
Basic Earnings/(Loss) Per
Share From Discontinued .60 (.67) .93 .09 .95
Operations
Diluted Earnings Per Share
From Continuing Operations .10 .31 .15 .01 .57
Diluted Earnings/(Loss) Per
Share From Discontinued .60 (.67) .93 .09 .95
Operations
--------------------------------------------------------------------------------
</TABLE>
(Dollars in thousands, except per share data)
16
<PAGE>
(b) Index to Financial Statements
Page
Report of Independent Accountants - PricewaterhouseCoopers LLP 18
Consolidated Balance Sheets at April 29, 2000 and May 1, 1999 19
Consolidated Statements of Earnings and Comprehensive Income
For the three years ended April 29, 2000, May 1, 1999, and
May 2, 1998 20
Consolidated Statements of Shareholders Equity
For the three years ended April 29, 2000, May 1, 1999, and
May 2, 1998 21
Consolidated Statements of Cash Flows
For the three years ended April 29, 2000, May 1, 1999, and
May 2, 1998 22
Notes to Consolidated Financial Statements 23
Financial Statement Schedules:
For the three years ended April 29, 2000, May 1, 1999, and
May 2, 1998
Schedule II - Consolidated Valuation and Qualifying Accounts 52
17
<PAGE>
Report of Independent Accountants
The Board of Directors and Shareholders
of Genesee Corporation:
In our opinion, the consolidated financial statements listed in the index
appearing under item 13(a)(1) and (2) of the Annual Report on Form 10-K
present fairly, in all material respects, the financial position of Genesee
Corporation and its subsidiaries at April 29, 2000 and May 1, 1999, and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended April 29, 2000, in conformity with generally
accepted accounting principles in the United States. These financial
statements are the responsibility of the Corporation's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards in the United States which require that
we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Rochester, New York
June 21, 2000
18
<PAGE>
GENESEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 29, 2000 and May 1, 1999
(Dollars in Thousands, except per share data)
<TABLE>
<S> <C> <C>
ASSETS 2000 1999
Current assets:
Cash and cash equivalents $ 7,649 $ 5,836
Marketable securities available for sale 8,029 7,964
Trade accounts receivable, less allowance for doubtful receivables
of $262 at April 29, 2000 and $478 at May 1, 1999 2,776 10,222
Inventories, at lower of cost (first-in, first-out) or market 9,197 16,414
Deferred income tax assets, current portion 113 397
Other current assets 61 751
--------------- ----------------
Total current assets 27,825 41,584
Net property, plant and equipment 12,629 37,040
Investment in and notes receivable from unconsolidated real estate partnerships 0 5,343
Investments in direct financing and leveraged leases 0 28,285
Goodwill and other intangibles net of accumulated amortization of $ 3,107 at
April 29, 2000 and $1,747 at May 1, 1999 26,662 28,280
Other assets 1,446 3,421
Net assets held for disposal - noncurrent 27,209 0
--------------- ----------------
Total assets $ 95,771 $ 143,953
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit $ 0 $ 3,000
Notes payable, current portion 300 82
Accounts payable 1,454 8,421
Income taxes payable 64 1,215
Federal and state beer taxes payable 0 1,354
Accrued compensation 235 3,505
Accrued postretirement benefits, current portion 0 731
Accrued expenses and other 1,384 5,374
Net liabilities held for disposal - current 2,127 0
--------------- ----------------
Total current liabilities 5,564 23,682
Notes payable, noncurrent portion 5,973 4,679
Deferred income tax liabilities, noncurrent portion 381 8,251
Accrued postretirement benefits, noncurrent portion 0 15,332
Other liabilities 646 493
--------------- ----------------
Total liabilities 12,564 52,437
Minority interests in consolidated subsidiaries 0 2,479
Shareholders' equity:
Common stock:
Class A common stock, voting, $.50 par value. Authorized 450,000 shares; 105 105
209,885 shares issued and outstanding
Class B common stock, non-voting, $.50 par value. Authorized 3,850,000 shares; 753 753
1,506,876 shares issued
Additional paid-in capital 5,847 5,856
Retained earnings 80,023 85,692
Accumulated other comprehensive (loss)/income (120) 77
Less: Class B treasury stock, at cost; 96,564 shares in 2000 and 97,852 shares in 1999 (3,401) (3,446)
--------------- ----------------
--------------- ----------------
Total shareholders' equity 83,207 89,037
--------------- ----------------
Total liabilities and shareholders' equity $ 95,771 $ 143,953
=============== ================
See accompanying notes to consolidated financial statements.
$0 $0
</TABLE>
19
<PAGE>
GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF EARNINGS AND COMPREHENSIVE INCOME
Years ended April 29, 2000, May 1, 1999, and May 2, 1998
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
Revenues $ 45,548 $ 44,893 $ 35,358
Cost of goods sold 39,421 36,854 29,895
------------- ------------- -------------
Gross profit 6,127 8,039 5,463
Selling, general and administrative expenses 7,801 7,287 4,018
------------- ------------- -------------
Operating (loss)/income (1,674) 752 1,445
Investment income 549 1,604 2,653
Other income 185 524 124
Interest expense (351) (873) (173)
------------- ------------- -------------
(Loss) / earnings from continuing operations before income taxes (1,291) 2,007 4,049
Income tax (benefit)/expense (150) 1,087 1,619
------------- ------------- -------------
(Loss) / earnings from continuing operations (1,141) 920 2,430
Discontinued operations:
(Loss) / earnings from operations of the discontinued segments
(less applicable income tax (benefit)/expense of $(142), $ 1,008, and $(645) (399) 1,543 (1,095)
Loss on disposal of Genesee Ventures, Inc., including provision
of $ 543 for operating income during phase-out period (less applicable
income tax benefit of $1,240 in fiscal 2000) (1,860) 0 0
------------- ------------- -------------
Net (loss)/earnings (3,400) 2,463 1,335
Other comprehensive (loss)/income, net of income taxes:
Unrealized holding (losses)/gains arising during the period (197) (675) 104
------------- ------------- -------------
Comprehensive (loss)/income $ (3,597) $ 1,788 $ 1,439
============= ============= =============
See accompanying notes to consolidated financial statements.
</TABLE>
20
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Genesee Corporation and Subsidiaries
(Dollars in thousands, except per share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Accumulated
Other
Common Stock Additional Retained Comprehensive Treasury Stock
Class A Class B Paid-In Capital Earnings Income (Loss) Class B Total
--------------------------------------------------------------------------------------------
Balance at May 3, 1997 $ 105 $ 753 $ 5,834 $87,720 $ 648 $ (3,505) $ 91,555
--------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 1,335
Other comprehensive income 104
Total comprehensive income 1,439
Dividends paid - $1.80 per share (2,912) (2,912)
Common stock bonus issued 8 30 38
--------------------------------------------------------------------------------------------
Balance at May 2, 1998 105 753 5,842 86,143 752 (3,475) 90,120
--------------------------------------------------------------------------------------------
Comprehensive income:
Net earnings 2,463
Other comprehensive income (675)
Total comprehensive income 1,788
Dividends paid - $1.80 per share (2,914) (2,914)
Common stock bonus issued 14 29 43
--------------------------------------------------------------------------------------------
Balance at May 1, 1999 105 753 5,856 85,692 77 (3,446) 89,037
--------------------------------------------------------------------------------------------
Comprehensive income:
Net loss (3,400)
Other comprehensive income (197)
Total comprehensive income (3,597)
Dividends paid - $1.40 per share (2,269) (2,269)
Common stock bonus issued (9) 45 36
--------------------------------------------------------------------------------------------
Balance at April 29, 2000 $ 105 $ 753 $ 5,847 $80,023 $ (120) $ (3,401) $ 83,207
--------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements
</TABLE>
21
<PAGE>
GENESEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended April 29, 2000, May 1, 1999, and May 2, 1998
<TABLE>
<S> <C> <C> <C>
(Dollars in thousands) 2000 1999 1998
Cash flows from operating activities:
Net (loss) / earnings from continuing operations $ (1,141) $ 920 $ 2,430
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 2,853 2,165 1,239
Net gain on sale of marketable securities (7) (922) (1,302)
Net loss / (gain) on sale of property, plant and equipment 520 (98) (36)
Deferred tax provision 185 (327) (131)
Other 577 762 451
Changes in non-cash assets and liabilities:
Trade accounts receivable 775 (336) 41
Inventories 1,868 (1,671) (1,368)
Other assets (327) 904 (205)
Accounts payable (429) 54 (511)
Accrued expenses and other (809) (1,584) (678)
Income taxes payable (1,151) 365 (240)
Other liabilities (547) 101 127
----------- ------------ ------------
Net cash provided by (used in) continuing operating
activities 2,367 333 (183)
Net cash provided by discontinued operations 1,464 8,157 6,389
----------- ------------ ------------
Net cash provided by operating activities 3,831 8,490 6,206
Cash flows from investing activities:
Purchase of TKI Foods, net of cash acquired 0 (18,632) 0
Purchase of Freedom Foods Foods, net of cash acquired 0 0 (11,060)
Capital expenditures (4,491) (5,368) (1,157)
Proceeds from sale of property, plant, and equipment 65 600 802
Proceeds from sale of marketable securities 3,455 10,140 31,668
Purchases of marketable securities and other investments (3,499) (1,929) (15,385)
----------- ------------ ------------
Net cash (used in) provided by continuing investing
activities (4,470) (15,189) 4,868
Net cash provided by (used in) discontinued operations 6,209 4,996 (9,435)
Net cash provided by (used in) investing activities 1,739 (10,193) (4,567)
Cash flows from financing activities:
Proceeds from acquisition of debt 1,700 14,800 -
Principal payments on debt (3,188) (7,039) (556)
Payment of dividends (2,269) (2,914) (2,912)
Net cash (used in) provided by financing acttivities (3,757) 4,847 (3,468)
Net increase (decrease) in cash and cash equivalents 1,813 3,144 (1,829)
Cash and cash equivalents at beginning of the period 5,836 2,692 4,521
Cash and cash equivalents at end of the period $ 7,649 $ 5,836 $ 2,692
See accompanying notes to consolidated financial statements.
</TABLE>
22
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
April 29, 2000, May 1, 1999, and May 2, 1998
(1) Summary of Significant Accounting Policies
Principles of Consolidation and Nature of Operations
The consolidated financial statements of Genesee Corporation and
subsidiaries (the Corporation) include for continuing operations, the
consolidated accounts of Genesee Corporation and Ontario Foods, Inc.
The vast majority of the Corporation's food products are sold in the
United States to independent wholesalers or retail establishments.
All significant inter-company balances and transactions have been
eliminated in consolidation.
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents include all cash balances and highly liquid
investments with an original maturity of three months or less.
Marketable securities include mutual funds; corporate, government and
government agency obligations; and common stock and equivalents.
Comprehensive Income
The Corporation reports comprehensive income in accordance with the
provisions of Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income (SFAS 130). This statement establishes
standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains, losses, and other comprehensive
income) in a set of financial statements in order to report a measure
of all changes in equity of an enterprise. Other comprehensive income
refers to revenues, expenses, gains and, losses that are included in
comprehensive income but excluded from net earnings.
The amount of income tax (benefit) or expense allocated to other
comprehensive income for fiscal 2000, 1999 and 1998 was approximately
$(110,000), $(380,000) and $59,000, respectively.
Property, Plant and Equipment
The Corporation provides for depreciation at rates that are estimated
to expense the cost of depreciable assets over the following useful
lives: buildings and building improvements, 20 to 25 years; machinery
and equipment, 7 to 10 years; office equipment, furniture and fixtures,
5 years; vehicles, 5 years; leasehold improvements, 10 years. The
straight-line method of depreciation is generally used on all assets.
Depreciation expense amounted to $1,397,089, $673,910 and $553,866 in
fiscal 2000, 1999, and 1998, respectively.
23
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
The Corporation regularly assesses all of its long-lived assets for
impairment and recognizes a loss when the carrying value of an asset
exceeds its fair value. The Corporation determined that no impairment
loss needs to be recognized for applicable assets in fiscal 2000,
fiscal 1999 and fiscal 1998.
Goodwill and Other Intangibles
Goodwill and other intangibles are amortized on a straight-line basis
ranging from 3 to 25 years. The carrying value of goodwill and other
intangibles are assessed periodically based on the expected future cash
flows of the assets associated with the goodwill and other intangibles.
Income Taxes
The provision for income taxes is based upon pre-tax earnings, with
deferred income taxes arising from the permanent and temporary
differences between the financial reporting basis and the tax basis of
the Corporation's assets and liabilities. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year
in which the temporary differences are expected to reverse and give
immediate effect to changes in income tax rates.
Stock-Based Compensation
The Corporation measures compensation cost for its stock-based
compensation plans under the provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees. In
accordance with Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), disclosure of
compensation costs on the basis of fair value is presented in Note 11 -
Stock Option and Bonus Plans.
Concentration of Credit Risk
The majority of the accounts receivable balances are from food
retailers. The Corporation minimizes its credit risk with purchase
money security interests in inventory and personal guarantees or
letters of credit.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
24
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
Earnings Per Share
The Corporation presents Basic earnings per share, which is computed by
dividing the income available to common shareholders by the weighted
average number of common shares outstanding for the period, and Diluted
earnings per share, which reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
Reclassifications
It is the Corporation's policy to reclassify certain amounts in the
prior year consolidated financial statements to conform with the
current year presentation.
Fiscal Year
The Corporation's fiscal year ends on the Saturday closest to April 30.
Fiscal years for the financial statements included herein ended April
29, 2000, May 1, 1999, and May 2, 1998.
(2) Planned Divestiture of the Corporation's Brewing, Equipment Leasing and
Real Estate Investment Businesses
The Corporation has announced plans to divest its brewing and equipment
leasing businesses. In accordance with generally accepted accounting
principles, the results of operations of the brewing, equipment
leasing, and real estate investment businesses have been segregated
from the Corporation's continuing operations and accounted for as
discontinued operations in the accompanying consolidated statements of
earnings and comprehensive income and in the consolidated statements of
cash flows. The results of operations for the brewing, equipment
leasing and real estate investment businesses were as follows:
<TABLE>
<S> <C> <C> <C>
(Dollars in thousands) Fiscal 2000 Fiscal 1999 Fiscal 1998
Revenue $ 120,983 $ 135,687 $ 152,482
Less Beer Taxes (24,552) (28,411) (32,265)
------------------ ----------------- ----------------
Net Revenue 96,431 107,276 120,217
Cost of Goods Sold (70,785) (78,897) (90,021)
Selling, General, and Admin. (25,661) (28,783) (32,328)
Other (Expense) / income (526) 2,955 392
(Loss) / earnings from operations of
discontinued operations, net of tax
benefit (399) 1,543 (1,095)
==================== ================= ==================
Loss on disposal of Genesee Ventures,
Inc., net of tax benefit $ (1,860) $ - $ -
</TABLE>
25
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Planned Divestiture of the Corporation's Brewing, Equipment Leasing and
Real Estate Investment Businesses (continued)
The net assets of the brewing, equipment leasing and real estate
investment businesses have been excluded from their respective captions
and reported as net assets (liabilities) held for disposal in the
accompanying consolidated balance sheet at April 29, 2000. The net
assets of the brewing, equipment leasing and real estate investment
businesses at April 29, 2000 were as follows:
(Dollars in thousands)
Accounts receivable, net $ 5,911
Inventory 4,678
Net deferred income tax asset, current portion 1,207
Other current assets 357
Accounts payable (6,156)
Federal and state beer taxes payable (1,703)
Accrued compensation (2,636)
Accrued postretirement benefits, current portion (600)
Accrued expenses and other (3,185)
-----------
Net liabilities held for disposal - current $ (2,127)
===========
Net property, plant and equipment $ 23,127
Investment in and notes receivable from unconsolidated real
estate partnerships 5,289
Investment in direct financing and leveraged leases 21,491
Net deferred income tax liability, noncurrent portion (6,590)
Other assets 1,079
Accrued postretirement benefits, noncurrent portion (14,476)
Other liabilities (119)
Minority interest (2,592)
-----------
Net assets held for disposal - noncurrent $ 27,209
===========
26
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Planned Divestiture of the Corporation's Brewing, Equipment Leasing and
Real Estate Investment Businesses (continued)
The Corporation's investment in a real estate limited partnership in
which it has less than a majority interest is accounted for by the
equity method. The Corporation's proportionate share of the results of
operations of this unconsolidated limited partnership is recorded net
of tax in discontinued operations.
Returnable Containers
Returnable containers (kegs, bottles and related cases), specifically
identifiable as owned by The Genesee Brewing Company, Inc., are
capitalized at cost and are reflected in the consolidated financial
statements in property, plant and equipment. All generic returnable
containers are expensed when shipped.
A liability for deposits charged to customers for returnable containers
is included in the consolidated financial statements.
Revenue Recognition
Revenue from the sale of beer and ale is recognized upon shipment.
Revenue from the Corporation's lease portfolio is recognized on a level
yield method.
Concentration of Credit Risk
The majority of the accounts receivable balances are from malt beverage
distributors. The Corporation minimizes its credit risk with purchase
money security interests in inventory and personal guarantees or
letters of credit. The Corporation's lease receivable balances are from
a diversity of lessees in various industries and businesses. This
diversity, in addition to security interests in the leased equipment,
allows the Corporation to minimize its credit risk on lease
receivables.
Real Estate Investment
During the second quarter of fiscal 1998, the Corporation and its
partners finalized negotiations with a new lender to refinance the
mortgage on a Rochester, New York office building. The financing
package includes a $31.5 million first mortgage loan obtained on a
non-recourse basis and a $5.5 million term loan that is secured, in
part, by a 50% limited guarantee from the Corporation. The
Corporation's exposure under the guarantee is capped at $2.75 million.
The building has an appraised value in excess of the total debt against
it. In addition, the other partners in the project have provided the
Corporation with collateral to secure the Corporation's obligation
under its guarantee of the term loan.
Retirement Plans
Substantially all union employees are covered under a multi-employer
pension plan, which requires the Corporation to contribute specified
amounts per employee. All costs under the plan
27
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Planned Divestiture of the Corporation's Brewing, Equipment Leasing and
Real Estate Investment Businesses (continued)
are paid currently and charged directly to earnings ($719,000 in fiscal
2000, $815,000 in fiscal 1999, and $853,000 in fiscal 1998).
All salaried and office employees who have been employed by the
Corporation for two years are eligible for coverage in fully trusteed,
contributory (optional) profit sharing retirement plans. The plans
generally provide for annual contributions by the Corporation at the
discretion of the Board of Directors. Contributions under the plans are
paid currently and charged directly to earnings ($ 959,000 in fiscal
2000, $984,000 in fiscal 1999, and $1,081,000 in fiscal 1998).
Leasing Activities
The Corporation's leasing activity is conducted by Cheyenne Leasing
Company, a joint venture that is 85% owned by Genesee Ventures, Inc.
Information pertaining to the Corporation's net investment in direct
financing leases and leveraged leases at April 29, 2000 and May 1, 1999
is presented below:
<TABLE>
<S> <C> <C> <C> <C>
2000 1999
-------------------------- --------------------
Direct Direct
Financing Leveraged Financing Leveraged
Minimum rentals receivable $ 1,160 $ 287 $ 1,946 $ 444
Estimated unguaranteed residual
value of leased assets 687 24,382 1,104 31,820
Unearned and deferred income (187) (4,838) (399) (6,630)
------- -------- ------- --------
Investment in leases 1,660 19,831 2,651 25,634
------- -------- -------- --------
Investment in direct financing and leveraged leases 21,491 28,285
Deferred taxes arising from leases (10,800) (13,694)
------- -------
Net after-tax investment in leases $ 10,691 $ 14,591
======== =======
</TABLE>
(Dollars in thousands)
The following is a schedule of minimum rentals receivable by year for
direct financing and leveraged leases at April 29, 2000:
Fiscal Year:
2001 $ 927
2002 351
2003 169
Total minimum rentals receivable $ 1,447
(Dollars in thousands)
28
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Planned Divestiture of the Corporation's Brewing, Equipment Leasing and
Real Estate Investment Businesses (continued)
Postretirement Benefits
The Corporation provides certain health care and life insurance
benefits to eligible retired employees and spouses under a welfare
benefit plan (the Plan) covering substantially all retirees and
employees of Genesee Brewing Company. The Corporation's share of
non-bargaining health care costs is limited to twice its fiscal 1993
cost, with the Corporation sharing future health care cost increases
equally with non-bargaining retirees until such limit is reached.
Effective January 1, 1999, the Corporation implemented a cap on the
Corporation's HMO medical cost for bargaining retirees equal to 135% of
its 1994 cost. Previously, the cap on the Corporation's medical cost
for bargaining retirees was equal to 150% of its 1994 cost. The
Corporation pays for all future health care cost increases until the
cap is reached.
The life insurance benefits are noncontributory and provide an earnings
related benefit to salaried exempt employees and executives and a fixed
benefit to other covered employees. The Plan is not prefunded by the
Corporation and there are no assets associated with the Plan.
The following table sets forth the accumulated postretirement benefit
obligation (APBO) and the total postretirement benefit liability for
the Plan at April 29, 2000 and May 1, 1999.
(Dollars in thousands)
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Accumulated postretirement benefit obligation (APBO) $ 10,974 $ 12,161
Unrecognized prior service cost 2,055 2,644
Unrecognized net actuarial gain 2,047 1,258
----- -----
Total postretirement benefit liability $ 15,076 $ 16,063
======= =======
</TABLE>
As of April 29, 2000 and May 1, 1999, $600,000 and $731,000 of this
obligation was classified as a current liability and $14,476,000 and
$15,332,000 was classified as a long-term liability, respectively.
29
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Planned Divestiture of the Corporation's Brewing, Equipment Leasing and
Real Estate Investment Businesses (continued)
Net periodic postretirement benefit cost for fiscal years ended April
29, 2000, May 1, 1999, and May 2, 1998 includes the following
components:
(Dollars in thousands)
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Service cost $ 253 $ 269 $ 226
Interest cost 822 789 845
Amortization of prior service cost (377) (349) (349)
Amortization of gain (3) (42) (94)
Gain from curtailment (891) - -
Net periodic postretirement (benefit) / cost $ (196) $ 667 $ 628
The following table summarizes the change in the APBO for fiscal 2000 and fiscal 1999
(Dollars in thousands)
</TABLE>
<TABLE>
<S> <C> <C>
2000 1999
APBO, beginning of year $ 12,161 $ 11,669
Service cost 253 269
Interest cost 822 789
Actuarial (gain)/loss (792) 464
Benefits paid (791) (731)
Amendments - (299)
Curtailment gain (679) -
----------- -----------
APBO, end of year $ 10,974 $ 12,161
========= ========
</TABLE>
For measurement purposes, a 6.5%, 7.5% and 8.5% annual trend rate for
health care costs was assumed for fiscal 2000, 1999 and 1998
respectively, decreasing gradually to 5.5% by fiscal 2001 and remaining
at that level thereafter. The long-term rate for compensation increases
for non-bargaining employees is assumed to be 4% for each year. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.75% at April 29, 2000 and 7.0%
at May 1,1999 and May 2, 1998.
Increasing the assumed health care cost trend rates by 1 percentage
point in each year would not have a significant impact on the
accumulated postretirement benefit obligation as of April 29, 2000 nor
on the net periodic postretirement benefit expense for fiscal 2000.
30
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Acquisitions
On August 3, 1998, the Corporation acquired all of the common stock of
TKI Foods, Inc. (TKI) and certain assets of Spectrum Foods, Inc.
(Spectrum), food companies located in Springfield and Decatur,
Illinois, respectively, for $18.6 million, representing $ 5.6 million
of assets acquired and $4.2 million of liabilities assumed. TKI and
Spectrum primarily package a broad range of dry food products,
including artificial sweeteners, that are sold to retail supermarket
chains under their own labels. Many of these supermarket chains were
already customers of the Corporation. The acquisition was accounted for
using the purchase method and was financed by drawing $10.0 million of
a $15.0 million credit facility from a commercial bank and with the
Corporation's cash reserves and has been included in the Corporation's
results of operations since the date of acquisition. The excess of the
aggregate purchase price over net assets acquired was approximately
$17.2 million.
(4) Financial Instruments
The following estimated fair value amounts have been determined using
available market information and appropriate valuation methodologies.
However, considerable judgment is necessarily required in interpreting
market data to develop the estimates of value. Accordingly, the
estimates presented herein are not necessarily indicative of the
amounts that the Corporation could realize in a current market
exchange. The use of different market assumptions or estimation
methodologies may have a material effect on the estimated fair value
amounts.
The carrying amount of cash and cash equivalents approximate a
reasonable estimation of their fair value. Fair value of marketable
securities is determined based on quoted market prices for investments.
Fair value of the mortgage receivables is based on discounted cash
flows. Fair value of the mortgage payable, based on discounted cash
flows, is $401,000 less than the carrying value at April 29, 2000 and
equal to the carrying value at May 1, 1999.
Marketable equity securities are classified as available for sale. The
amortized cost, gross unrealized gains/losses and fair values of
marketable securities at April 29, 2000 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Fixed income securities:
Debt securities issued by U.S. Government $ 3,595 $ 43 $ 90 $ 3,548
Corporate debt securities 4,485 - 138 4,347
8,080 43 228 7,895
Mutual funds:
Fixed income funds 42 - 2 40
Other 94 - - 94
Marketable securities available for sale $ 8,216 $ 43 $ 230 $ 8,029
</TABLE>
(Dollars in thousands)
31
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Financial Instruments (continued)
The amortized cost, gross unrealized gains/losses and fair values of
marketable securities at May 1, 1999 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Fixed income securities:
Debt securities issued by U.S. Government $ 3,501 $ 186 $ 20 $ 3,667
Corporate debt securities 3,946 49 94 3,901
7,447 235 114 7,568
Mutual funds:
Fixed income funds 39 - 1 38
Other 358 - - 358
Marketable securities available for sale $ 7,844 $ 235 $ 115 $ 7,964
===== ==== ==== =====
</TABLE>
(Dollars in thousands)
The amortized cost and fair value of fixed income securities at April
29, 2000, by contractual maturity, are as follows:
<TABLE>
<S> <C> <C>
Amortized Fair
Cost Value
Contractual maturity:
Less than one year $ 690 $ 651
After one year, but within five years 3,712 3,616
After five years, but within ten years 1,809 1,742
After ten years 1,869 1,886
---------- --------
Total fixed income securities $ 8,080 $ 7,895
======= ======
</TABLE>
(Dollars in thousands)
The following represents the total proceeds from sales of marketable
securities for fiscal years ended April 29, 2000, May 1, 1999, and May
2, 1998 and the components of net gains and losses realized on those
sales, which are determined on a weighted average basis:
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Proceeds from sales $ 3,455 $ 10,140 $ 31,668
===== ====== ======
Gains from sales 104 1,048 1,818
Losses from sales (97) (126) (516)
Net gains from sales $ 7 $ 922 $ 1,302
======= ====== ========
</TABLE>
(Dollars in thousands)
32
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Income Taxes
Components of income tax expense (benefit) from continuing operations
for the fiscal years ended April 29, 2000, May 1, 1999, and May 2, 1998
are as follows:
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
Current:
Federal $ (319) $ 1,202 $ 1,487
State (16) 212 263
Total current income tax (benefit) / expense (335) 1,414 1,750
Deferred:
Federal 157 (278) (111)
State 28 (49) (20)
Total deferred income tax expense / (benefit) 185 (327) (131)
Total income tax (benefit) / expense $ (150) $ 1,087 $ 1,619
======= ======= =====
</TABLE>
(Dollars in thousands)
The actual tax expense reflected in the consolidated statements of
earnings differs from the expected tax expense, computed by applying
the U.S. federal corporate tax rate to earnings before income taxes as
follows for the fiscal years ended April 29, 2000, May 1, 1999, and May
2, 1998:
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Computed expected tax (benefit) / expense @ 34% $ (439) $ 682 $ 1,377
State income taxes (net of federal income tax benefit) 8 74 145
Amortization of Goodwill 375 330 129
Other, net (94) 1 (32)
------- --------- -------
Total income tax (benefit) / expense $ (150) $ 1,087 $ 1,619
===== ======= =====
Effective tax rate 11.6% 54.2% 40.0%
====== ====== ======
</TABLE>
(Dollars in thousands)
33
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Income Taxes (continued)
------------
The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and liabilities at April 29,
2000 and May 1, 1999 are presented below:
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Deferred income tax assets:
Deposit liabilities $ - $ 205
Allowance for doubtful accounts 82 175
Unrealized loss on marketable securities 67 -
Operating accruals 170 168
Package design 169 125
Non-compete agreement 94 -
Deferred compensation and other
employee related accruals 195 1,208
Postretirement benefits other than pensions - 6,425
Alternative minimum tax credit carryforward - 2,586
State investment tax credit - 1,390
Other 30 1,503
-------- --------
Gross deferred income tax assets 807 13,785
Valuation allowance for deferred income tax assets - (1,033)
---------- --------
Total deferred income tax assets 807 12,752
------- --------
Deferred income tax liabilities:
Basis differential on leasing portfolio - 13,694
Accelerated depreciation on plant and equipment 774 4,627
Deferred gain on investment - 1,378
Returnable containers - 82
Unrealized gains on marketable securities - 43
Other 301 782
-------- --------
Total deferred income tax liabilities 1,075 20,606
-------- -------
Net deferred income tax liabilities $ 268 $ 7,854
========= ========
</TABLE>
(Dollars in thousands)
The change in the deferred tax asset or liability for unrealized gains
or losses on investments classified as available for sale is reflected
in equity in accordance with Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (SFAS 115). The valuation allowance for fiscal 1999
presented above relates primarily to state investment credits.
Therefore, no valuation allowance exists for fiscal 2000 as these
credits and the related valuation allowance are included in
discontinued operations.
34
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Inventories
Inventories at April 29, 2000 and May 1, 1999 are summarized as
follows:
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Finished goods $ 4,867 $ 6,292
--
Goods in process - 1,445
Raw materials, containers and packaging supplies 4,330 8,677
-------- -------
Total inventories $ 9,197 $ 16,414
======= ======
(Dollars in thousands)
</TABLE>
(7) Property, Plant and Equipment
Property, plant and equipment at April 29, 2000 and May 1, 1999 are
summarized as follows:
<TABLE>
<S> <C> <C>
2000 1999
---- ----
Land and land improvements $ 294 $ 1,175
Buildings 6,553 22,221
Machinery, equipment, furniture and fixtures 9,843 83,683
Returnable containers 0 12,876
Construction in process 511 5,251
------- ---------
Total property, plant and equipment 17,201 125,206
Less accumulated depreciation 4,572 88,166
------- --------
Net property, plant and equipment $ 12,629 $ 37,040
======= ======
(Dollars in thousands)
</TABLE>
35
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Debt
Mortgage Note Payable
The Corporation borrowed $4,800,000 through a building loan agreement
with a bank to purchase a building for the Corporation's food business.
This mortgage note payable matures in November 2008, at which time all
outstanding principal and interest is due. Monthly payments of
principal and interest, currently $32,380, are required with interest
accruing at a fixed annual rate of 6.49%. The note is secured by the
building acquired as well as by certain equipment and has an
outstanding balance of $4,680,000 at April 29, 2000. The note agreement
contains certain financial covenants of which the Corporation is
currently in compliance.
Term Note Payable
During fiscal 2000, the Corporation borrowed $1,700,000 under a
multiple disbursement term note payable. These funds were used for
renovation to, and construction at, the building mentioned above.
Maturity of this note is November 2007 with principal payments of
$17,700 plus interest at an annual rate of LIBOR plus 110 basis points
due monthly. This note payable is secured by a first mortgage on the
building and by certain equipment and has an outstanding balance of
$1,593,000 at April 29, 2000. The note agreement also contains certain
financial covenants of which the Corporation is currently in
compliance.
Future aggregate maturities of debt for the next five fiscal years and
thereafter is as follows:
Fiscal Year:
2001 $ 300
2002 305
2003 313
2004 319
2005 326
Thereafter 4,710
-------
$ 6,273
(Dollars in thousands)
36
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Segment Reporting
The Corporation has two reportable segments included in continuing
operations: food processing and corporate. The food processing segment
produces dry side dish, bouillon, artificial sweeteners, soup, drink
mix and instant iced tea products under private label for many of the
country's largest supermarket chains. The corporate segment retains the
Corporation's investments in marketable securities, generating
investment income as well as supporting corporate costs.
The Corporation has two business segments included in discontinued
operations: brewing and equipment leasing and real estate. The brewing
segment produces beers and ales for wholesale and retail distribution
throughout the United States, primarily in the northeast region of the
country. The equipment leasing and real estate segment leases
construction, transportation and other high-value equipment and
machinery, and partners with experienced real estate developers to
invest in certain properties.
The accounting policies of the operating segments are described in the
summary of significant accounting policies (Note 1.) The Corporation
evaluates performance based on operating income or loss and earnings
before income taxes. The accounting policies of the discontinued
segments are described in the divestiture note to the financial
statements (Note 2.)
Intersegment sales and transfers are not material and are eliminated in
consolidation. No single customer accounted for more than 10% of
revenues, and the Corporation's international revenues are not
significant.
The Corporation's segments, other than corporate, are strategic
business units that offer different products and services. They are
managed separately because each business requires different technology
and marketing strategies.
37
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Financial information for the Corporation's reportable segments is as follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
Food Discontinued
Fiscal Year Processing Corporate Operations Eliminations Consolidated
2000
---------------------------------------------------------------------------------------------------------------------
Net revenues from external customers $ 45,548 $ - $ - $ - $ 45,548
Depreciation and amortization 2,853 - - - 2,853
Operating income/(loss) 190 (1,864) - - (1,674)
Investment income - 549 - - 549
(Loss)/earnings from continuing
operations before income taxes (701) (1,027) - 437 (1,291)
Identifiable assets 53,040 15,522 27,209 - 95,771
Capital expenditures 4,491 - - - 4,491
1999
---------------------------------------------------------------------------------------------------------------------
Net revenues from external customers $ 44,893 $ - $ - $ - $ 44,893
Depreciation and amortization 2,165 - - - 2,165
Operating income/(loss) 1,554 (802) - - 752
Investment income 32 1,572 - - 1,604
(Loss)/earnings from continuing
operations before income taxes 806 2,271 - (1,070) 2,007
Identifiable assets 54,162 3,265 86,526 - 143,953
Capital expenditures 5,368 - - - 5,368
1998
---------------------------------------------------------------------------------------------------------------------
Net revenues from external customers $ 35,358 $ - $ - $ - $ 35,358
Depreciation and amortization 1,239 - - - 1,239
Operating income/(loss) 1,973 (528) - - 1,445
Investment income (3) 2,656 - - 2,653
(Loss)/earnings from continuing
operations before income taxes 1,436 4,313 - (1,700) 4,049
Identifiable assets 25,461 10,852 99,276 - 135,589
Capital expenditures 1,157 - - - 1,157
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(Dollars in thousands)
38
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Supplemental Cash Flow Information
Cash paid for taxes was approximately $1,765,000, $1,132,000, and
$1,504,000 in fiscal 2000, fiscal 1999, and fiscal 1998 respectively;
cash paid for interest was approximately $351,000, $873,000, and
$173,000 in fiscal 2000, fiscal 1999, and fiscal 1998 respectively.
Interest capitalized amounted to $194,000 in fiscal 2000. No interest
was capitalized in fiscal 1999 or 1998.
(11) Stock Option and Bonus Plans
Under the Corporation's 1992 Stock Plan, as amended (the "Stock Plan"),
officers and other key employees may, at the discretion of the
Management Continuity Committee of the Board of Directors, be granted
options that allow for the purchase of shares of the Corporation's
Class A and Class B common stock. These options may be exercised any
time from the award date to a specified date not more than ten years
from the award date or five years in the case of 10% or more
shareholders. Under the Stock Plan, outside directors are granted
options each year to purchase shares of Class B common stock. Outside
director options may be exercised at any time from the option award
date until five years after the award date.
The Corporation has adopted a Stock Bonus Incentive Program under the
Stock Plan (the "Bonus Program"). The Bonus Program authorizes the
Board of Directors to award shares of Class B common stock to officers
and other key employees. These shares are issued from treasury shares
in five equal annual installments commencing in the year in which the
award takes place.
Changes in stock options are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Options Weighted Average Options Weighted Average
Outstanding Price Per Share Exercisable Price Per Share
----------- --------------- ----------- ---------------
Balance at May 3, 1997 108,500 $ 42.46 108,500 $ 42.46
Granted 38,000 45.48
Forfeited (21,500) 46.72
--------- --------
Balance at May 2, 1998 125,000 42.63 125,000 42.63
Granted 38,500 32.35
Expired (15,000) 35.77
Forfeited (10,000) 39.77
-------- -----
Balance at May 1, 1999 138,500 40.72 138,500 40.72
Granted 131,301 25.24
Expired (21,000) 39.40
Forfeited (32,750) 40.12
---------- --------
Balance at April29,2000 216,051 $ 31.53 119,075 $ 36.60
</TABLE>
Common stock reserved for options and employee awards totaled 219,019
shares as of April 29, 2000 and 138,933 shares as of May 1, 1999.
39
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Stock Option and Bonus Plans (continued)
The Corporation adopted the disclosure-only provisions of SFAS 123, and
continues to apply the provisions of APB Opinion No. 25, Accounting for
Stock Issued to Employees for plan accounting. If compensation cost for
the Corporation's stock-based plans had been determined based on the
fair value at the grant dates in accordance with SFAS 123, the
Corporation's net earnings and basic and diluted earnings per share for
the fiscal years ended April 29, 2000, May 1, 1999, and May 2, 1998
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<S> <C> <C>
Reported Pro Forma
Earnings Earnings
2000
Net loss $(3,400) $ (3,590)
Basic loss per share (2.10) (2.22)
Diluted loss per share (2.10) (2.22)
1999
Net earnings $2,463 $ 2,332
Basic earnings per share 1.52 1.44
Diluted earnings per share 1.52 1.44
1998
Net earnings $1,335 $1,070
Basic earnings per share .83 .66
Diluted earnings per share .82 .66
(Dollars in thousands, except per share data)
</TABLE>
For purposes of this disclosure, the fair value of each option was
estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions: expected option
term of 5 years, expected volatility of 23.6%, 19.2%, and 18.2% in
fiscal 2000, fiscal 1999, and fiscal 1998, respectively, expected
dividend yield of 5.6%, 5.8% and 4.1% and risk-free interest rates of
5.92%, 5.29%, and 6.08% in fiscal 2000, 1999, and 1998, respectively.
The weighted average fair value of stock options granted was $4.26,
$3.40, and $6.97 in fiscal 2000, 1999, and 1998, respectively.
The following table summarizes information about stock options
outstanding and exercisable at April 29, 2000:
<TABLE>
<S> <C> <C> <C> <C> <C>
Options Outstanding Options Exercisable
Range of Exercise Prices Wgtd. Avg. Contractual Wgtd. Avg Wgtd. Avg.
Per Share Number Life in Years Exercise Price Number Exercise Price
-------------------------- -------------- ----------------------- ----------------- ----------------- -----------------
$20.00 - 35.99 160,301 7.4 $ 26.56 63,325 28.47
36.00 - 43.99 4,500 1.5 40.96 4,500 40.96
44.00 - 48.00 51,250 1.7 46.27 51,250 46.27
-------------------------- -------------- ----------------------- ----------------- ----------------- -----------------
$20.00 - 48.00 216,051 3.5 $ 31.53 119,075 $ 36.60
-------------------------- -------------- ----------------------- ----------------- ----------------- -----------------
</TABLE>
40
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Earnings Per Share
The computation of earnings per share for the years ended April 29,
2000, May 1, 1999, and May 2, 1998 is based on the following:
<TABLE>
<S> <C> <C> <C>
2000 1999 1998
---- ---- ----
Earnings/(loss) from continuing operations $ (1,141) $ 920 $ 2,430
Earnings/(loss) from discontinued operations (399) 1,543 (1,095)
Earnings/(loss) from disposal of Genesee Ventures, Inc. (1,860) - -
Net earnings/(loss) (3,400) 2,463 1,335
Basic earnings/(loss) per share from continuing operations (.70) .57 1.50
Basic earnings/(loss) per share from discontinued operations (.25) .95 (.67)
Basic earnings/(loss) per share from disposal of GVI, Inc (1.15) - -
(2.10) 1.52 .83
Diluted earnings/(loss) per share from continuing operations (.70) .57 1.49
Diluted earnings/(loss) per share from discontinued operations (.25) .95 (.67)
Diluted earnings/(loss) per share from disposal of GVI, Inc. (1.15) - -
(2.10) 1.52 .82
Weighted average basic common shares outstanding 1,620,013 1,618,793 1,617,962
Weighted average diluted common shares outstanding 1,620,013 1,618,841 1,622,069
Dollars in thousands, except for per share amounts
</TABLE>
In fiscal 2000, 1999 and 1998, respectively, 216,051, 133,500 and
80,750 shares of potential common stock are considered anti-dilutive
and are excluded from the calculation of diluted earnings per share.
(13) Retirement Plans
All salaried and office employees who have been employed by the
Corporation for two years are eligible for coverage in fully trusteed,
contributory (optional) profit sharing retirement plans. The plans
generally provide for annual contributions by the Corporation at the
discretion of the Board of Directors. Contributions under the plans are
paid currently and charged directly to earnings ($ 237,000 in fiscal
2000, $302,000 in fiscal 1999, and $208,000 in fiscal 1998).
41
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Directors: The table below lists the directors of the
Corporation and sets forth their ages, their other positions with the
Corporation and its subsidiaries, the principal occupations of those directors
who do not hold other positions with the Corporation or its subsidiaries, and
the expiration of their terms in office. The term in office of each director
expires at the annual meeting of shareholders of the Class A Common Stock held
in the year specified. William J. Hoot, former President and director of the
Corporation, retired as a director in October 1997 and was named to the honorary
position of Director Emeritus, in which capacity he is invited to attend
meetings of the Board of Directors, but he has no authority to vote or otherwise
direct or manage the business or affairs of the Corporation.
<TABLE>
<S> <C> <C> <C> <C>
Expiration
Director Position and Principal Occupation of Term
Name and Age Since for the Last Five Years in Office
------------------------------------------------------------------------------------------------------------------------
Stephen B. Ashley (60) 1987 Chairman and Chief Executive Officer of The Ashley Group 2002
(1)
William A. Buckingham (57) 1992 Retired; formerly Executive Vice President of First Empire 2001
State Corporation and Manufacturers and Traders Trust
Company (2)
Gary C. Geminn (57) 1986 Senior Vice President - Operations of Genesee Brewing 2000
Company (3)
Samuel T. Hubbard, Jr. (50) 1992 President and Chief Executive Officer of the Corporation 2001
(4)
Charles S. Wehle (52) 1976 Chairman of the Board of Directors and Senior Vice 2000
President of the Corporation (5)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Ashley has been Chairman and Chief Executive Officer of The Ashley
Group since July 1996. The Ashley Group is an affiliated group of privately
owned real estate management and investment companies. Prior to July 1996,
Mr. Ashley was Chairman and Chief Executive Officer of Sibley Mortgage
Corporation and Sibley Real Estate Services, privately owned mortgage
banking and real estate management companies, respectively. Mr. Ashley is
also a Director of Hahn Automotive Warehouse, Inc., Federal National
Mortgage Association, Exeter Fund, Inc. and Manning & Napier Insurance
Fund, Inc.
(2) Mr. Buckingham retired in 1996 as Executive Vice President of First Empire
State Corporation, a publicly held bank holding company, and Manufacturers
and Traders Trust Company, a New York State chartered bank. Mr. Buckingham
is also a Director of Hahn Automotive Warehouse, Inc.
(3) See Note (4) to Item 10 (b).
(4) See Note (1) to Item 10 (b). Mr. Hubbard is also a Director of M&T Bank
Corporation and RGS Energy, Inc.
(5) See Note (3) to Item 10(b).
42
<PAGE>
(b) Executive Officers and Significant Employees: The table below
lists the executive officers and significant employees of the Corporation and
its subsidiaries and sets forth their ages, the dates they became officers and
the offices held. Officers of the Corporation and its subsidiaries serve for a
term of one year beginning with the first meeting of the Board of Directors
occurring after the annual meeting of the holders of Class A Common Stock of the
Corporation.
<TABLE>
<S> <C> <C> <C>
Officer of the
Name Age Company Since Office
-------------------------------------------------------------------------------------------------------------------
Samuel T. Hubbard, Jr. 50 1999 President and Chief Executive Officer (1)
John B. Henderson 46 1999 Senior Vice President and Chief Financial Officer
(2)
Charles S. Wehle 52 1988 Chairman of the Board of Directors and Senior Vice
President of Corporation (3)
Gary C. Geminn 57 1985 Senior Vice President - Operations of Genesee
Brewing Company (4)
Karl D. Simonson 57 1994 Vice President - Foods Division (5)
William A. Neilson 49 1986 Vice President - Human Resources (6)
Mark W. Leunig 45 1988 Vice President, Secretary and General Counsel (7)
Vice President and Controller (8)
Michael C. Atseff 44 1992
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Hubbard was elected President and Chief Operating Officer of the
Corporation on June 17, 1999. He was elected President and Chief
Executive Officer on February 29, 2000. He is also a Director and Chief
Executive Officer of Genesee Brewing Company. Prior to joining the
Corporation, Mr. Hubbard was President and Chief Executive Officer of The
Alling & Cory Company, a position he held for more than five years. The
Alling & Cory Company was a distributor of paper and packaging products
headquartered in Rochester, New York.
(2) Mr. Henderson was elected Senior Vice President and Chief Financial
Officer of the Corporation on August 26, 1999. He is also a Senior Vice
President and Chief Financial Officer of Genesee Brewing Company. Prior
or joining the Corporation, Mr. Henderson was a Senior Vice President of
The Alling & Cory Company, a position he held for more than five years.
The Alling & Cory Company was a distributor of paper and packaging
products headquartered in Rochester, New York.
(3) Mr. C. S. Wehle was elected Chairman of the Board of Directors on March
16, 2000. He retired as Senior Vice President of the Corporation and
President of Genesee Brewing Company on May 15, 2000. He had served as
Senior Vice President of the Corporation for more than five years and as
President of Genesee Brewing Company since October 1996.
(4) Mr. Geminn was elected Senior Vice President - Operations of Genesee
Brewing Company in November 1997. Prior to that, he served as Vice
President - Production of Genesee Brewing Company, a position he held for
more than five years.
(5) Mr. Simonson was elected Vice President - Foods Division in October 1999.
Prior to that he served as Vice President - Planning and Development, a
position he held for more than five years. He is also President of the
Corporation's Foods Division, a position he has held for more than five
years.
43
<PAGE>
(6) Mr. Neilson has been Vice President - Human Resources of the Corporation
for more than five years. He is also Vice President - Human Resources of
Genesee Brewing Company.
(7) Mr. Leunig has been Vice President, Secretary and General Counsel of the
Corporation for more than five years. He also serves as Vice President,
Secretary and General Counsel of the Genesee Brewing Company.
(8) Mr. Atseff was elected Vice President and Controller of the Corporation
in August 1998. Prior to that, he was Controller of the Corporation, a
position he held for more than five years.
(c) Compliance with Section 16(a) of Securities Exchange Act of
1934: To the Corporation's knowledge, based solely on review of copies of
reports of initial ownership and changes of ownership furnished to the
Corporation by its directors, executive officers and persons who own more than
ten percent of the Corporation's Class B Common Stock, and written
representations to the Corporation by such persons that no other reports were
required, there were no failures by such persons to comply with the reporting
requirements under Section 16(a) of the Securities Exchange Act of 1934 during
the Corporation's fiscal year ended April 29, 2000.
Item 11. Executive Compensation
(a) Summary of Executive Compensation. The table below sets forth
a summary of compensation paid during the past three fiscal years for all
services rendered to the Corporation and its subsidiaries by the Chief Executive
Officer and the four other most highly compensated executive officers of the
Corporation whose total annual salary and bonus for the fiscal year ended April
29, 2000 exceeded $100,000.
44
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Other
Annual Restricted All Other
Name and Compen- Stock Stock Compensa-
Principal Position Fiscal Year Salary ($) Bonus ($) sation($) wards ($)(2) Options (#) tion ($)
------------------ ----------- ---------- --------- --------- ------------ ----------- -----------
John L. Wehle, Jr., 2000 291,393 2,813 1,406 0 0 1,712,569(3)
Former Chairman of the 1999 349,672 2,828 1,414 375 5,000 40,696
Board and Chief 1998 347,126 2,570 1,285 0 5,000 39,903
Executive Officer(1)
Samuel T. Hubbard Jr., 2000 269,850 131,250 0 0 66,222 41,186(4)
President and Chief 1999 - - - - 1,000 -
Executive Officer 1998 - - - - 1,000 -
Charles S. Wehle, 2000 163,083 2,575 1,288 0 0 23,509(5)
Chairman of the Board 1999 188,833 2,595 1,297 375 4,000 24,044
and Senior Vice 1998 204,500 1,928 964 0 4,000 23,992
President
Gary C. Geminn, Vice 2000 123,012 99,885 938 0 12,589 20,391(6)
President - Production 1999 118,021 7,668 884 250 2,000 14,043
of Genesee Brewing 1998 117,162 2,186 1,093 0 2,000 14,121
Company
Karl D. Simonson 2000 148,000 1,875 938 0 4,000 20,464(7)
Vice President - Foods 1999 139,000 38,064 943 250 2,000 18,053
Division 1998 121,650 16,354 884 0 2,000 14,931
Mark W. Leunig, Vice 2000 115,833 91,875 938 0 12,800 21,375(8)
President, General 1999 110,000 32,498 943 250 1,500 12,897
Counsel and Secretary 1998 107,697 14,944 884 0 1,500 11,717
</TABLE>
(1) Mr. J. L. Wehle, Jr., retired as Chief Executive Officer on March 2, 2000
and passed away on March 10, 2000.
(2) As of April 29, 2000, the aggregate number of shares and corresponding
value of restricted stock held by each of the named individuals was as
follows: 150 shares valued at $2,691 held by each of Messrs. Geminn, Leunig
and Simonson. No dividends are paid on the restricted stock.
(3) Reflects the following amounts paid by the Corporation: (a) severance
compensation of $700,000; (b) death benefit of $350,000; (c) accrued
vacation compensation of $30,874; and (d) $2,343 in premiums on life
insurance policies for the benefit of Mr. J. L. Wehle, Jr. Amount also
reflects $629,342 payable under the agreement described in Item 11(e)(2) of
this report.
(4) Amount reflects $39,624 contribution under the Corporation's Benefit
Restoration Plan, $847 in premiums paid by the Corporation on life
insurance policies for the benefit of Mr. Hubbard and $715 paid by the
Corporation for medical insurance buy out.
45
<PAGE>
(5) Amount reflects $16,000 contribution under the Corporation's Profit Sharing
Retirement Plan, $5,967 contribution under the Corporation's Benefit
Restoration Plan and $1,542 in premiums paid by the Corporation on life
insurance policies for the benefit of Mr. C. S. Wehle.
(6) Amount reflects $16,000 contribution under the Corporation's Profit
Sharing Retirement Plan, $3,074 contribution under the Corporation's
Benefit Restoration Plan and $1,317 in premiums paid by the Corporation on
life insurance policies for the benefit of Mr. Geminn.
(7) Amount reflects $16,000 contribution under the Corporation's Profit
Sharing Retirement Plan, $2,977 contribution under the Corporation's
Benefit Restoration Plan and $1,487 in premiums paid by the Corporation on
life insurance policies for the benefit of Mr. Simonson.
(8) Amount reflects $16,000 contribution under the Corporation's Profit
Sharing Retirement Plan, $4,926 contribution under the Corporation's
Benefit Restoration Plan and $449 in premiums paid by the Corporation on
life insurance policies for the benefit of Mr. Leunig.
(b) The table below sets forth information about options granted
to the named executive officers during the Corporation's fiscal year ended April
29, 2000.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Individual Grants Potential Realizable
----------------------------------------- Value at Assumed
% of Total Annual Rates of Stock
Options Price Appreciation
Options Granted to for Option Term (2)
Granted Employees in Exercise Price Expiration
Name (#) (1) Fiscal Year ($/SH) Date 5% ($) 10% ($)
----------------------------------------------------------------------------------------------------------------------
John L. Wehle, Jr. 0 - - - - -
Samuel T. Hubbard, Jr. 62,222 48.1% $25.31 9/01/09 435,099 961,455
John B. Henderson 19,556 15.1% $25.31 9/01/09 136,749 302,179
Charles S. Wehle 0 - - - - -
Gary C. Geminn 12,589 9.7% $25.31 9/01/09 88,031 194,525
Karl D. Simonson 4,000 3.1% $25.31 9/01/09 27,971 61,808
Mark W. Leunig 12,800 9.9% $25.31 9/01/09 89,506 197,786
</TABLE>
(1) Options to acquire shares of Class B Common Stock pursuant to the
Corporation's 1992 Stock Plan. Options are exercisable in their entirety
from and after the date of grant.
(2) The potential realizable value illustrates value that might be realized
upon exercise of the options immediately prior to the expiration of their
term, assuming the specified annual compound rates of appreciation on the
Corporation's Class B Common Stock over the term of the options.
(c) Exercise of Options by Executive Officers. The table below
sets forth information about the aggregate number of shares received and the
value realized by the named executive officer upon exercise of options exercised
during the Corporation's fiscal year ended April 29, 2000; and the aggregate
number and value of options held by the named executive officer at the end of
the fiscal year:
46
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Value of Unexercised
Number of Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
--------------------- ---------------------
Shares
Acquired on Value $ Exercis- Unexercis- Exercis- Unexercis-
Name Exercise Realized able able able able
------------------------------ -------------- ------------ ------------ --------------- ------------ ---------------
John L. Wehle, Jr. 0 0 15,000(1) 0 0 0
Samuel T. Hubbard, Jr. 0 0 19,555 46,667 0 0
Charles S. Wehle 0 0 11,000 0 0 0
Gary C. Geminn 0 0 9,147 9,442 0 0
Karl D. Simonson 0 0 6,500 3,000 0 0
Mark W. Leunig 0 0 7,700 9,600 0 0
</TABLE>
(1) Exercisable by Mr. Wehle's estate for one year following Mr. Wehle's death
on March 10, 2000.
(d) Director Compensation. Directors who are employees of the
Corporation do not receive directors' fees or other compensation for their
services as directors. Directors who are not employees, and William J. Hoot as
Director Emeritus, receive an annual fee of $7,000 plus $500 for each Board and
Committee meeting they attend. Charles S. Wehle receives an additional annual
fee of $10,000 as Chairman of the Board of Directors. Members of the Special
Committee created to review strategic alternatives for the Corporation's brewing
business are paid a fee of $250 per hour for time spent working on Special
Committee matters outside of Committee meetings. Each director who is not an
employee is also granted an option each year under the Corporation's 1992 Stock
Plan to purchase 1,000 shares of Class B Common Stock.
(e) Agreements With Named Executive Officers.
----------------------------------------
(1) Under an agreement with the Corporation, John L. Wehle,
Jr. retired as Chief Executive Officer of the Corporation, effective March 2,
2000. Under this agreement, the Corporation: (a) paid to Mr. Wehle severance
compensation of $700,000; (b) paid to Mr. Wehle's spouse a death benefit of
$350,000; (c) purchased for the benefit of Mr. Wehle a $600,000 life insurance
policy; and (d) agreed to provide medical benefits to Mr. Wehle's spouse for
three years from the date of the agreement.
(2) Under an agreement with the Corporation, John L. Wehle,
Jr. was employed by the Corporation for so long as was mutually agreed upon and
was entitled to receive for so long as he lived a monthly payment of $7,500 in
the event he ceased to be employed by the Corporation, whether by reason of
death, disability or otherwise. In the event Mr. Wehle died prior to having
received 120 such monthly installments, the Corporation was obligated to pay to
Mr. Wehle's designated beneficiaries or to his estate the remainder of such
installments or the "commuted value" (as that term is defined in the agreement)
of such installments as of the date of payment. Mr. Wehle died on March 10, 2000
prior to receiving any payments under the agreement and no payments have been
made under the agreement as of the date of this report. The amount payable under
the agreement based on the commuted value of the installments as of June 5, 2000
is $629,342.
(3) Under an agreement with the Corporation Charles S. Wehle
retired as Senior Vice President of the Corporation and President of Genesee
Brewing Company effective May 15, 2000. Under this agreement, Mr. Wehle was paid
$ 250,000 on May 15, 2000 and he will be paid $250,000 on January 1, 2001.
(4) The Corporation has an employment agreement with Samuel
T. Hubbard, Jr. which provides that if Mr. Hubbard's employment is terminated
without "Cause" or after a "Sale of the Company" (as those terms are defined in
47
<PAGE>
the agreement) the Corporation must pay Mr. Hubbard a lump sum equal to 150% of
his annual salary. If Mr. Hubbard voluntarily terminates his employment with the
Corporation, the Corporation must pay him a lump sum of $150,000. Under this
agreement, Mr. Hubbard is eligible to receive an annual bonus of up to 50% of
his annual salary at the discretion of the Management Continuity Committee of
the Corporation's Board of Directors. Under this agreement, the Corporation also
granted options to purchase the shares identified in Item 11(b) of this report
pursuant to vesting and other terms contained in the agreement. The Corporation
is also required to continue, for stated periods subsequent to termination of
employment, coverage for Mr. Hubbard under certain medical insurance and other
employee benefits plans and to provide certain other executive benefits to Mr.
Hubbard.
(5) The Corporation has employment agreements with Messrs.
Geminn, Leunig and Simonson which provide that if employment of the named
executive officer is terminated without "Cause" or after a "Sale of the Company"
(as those terms are defined in the agreement) the Corporation must pay to each
such officer a lump sum payment equal to his annual salary. Under the
agreements, the named executive officers are eligible to receive an annual bonus
of up to 35% of their annual salaries at the discretion of the Management
Continuity Committee of the Board of Directors. Under these agreements, the
Corporation also granted options to each of the named executive officers to
purchase the shares identified in Item 11(b) of this report pursuant to the
vesting and other terms contained in the agreements. Under the agreements, the
Corporation is also required to continue, for stated periods subsequent to
termination of employment, coverage for the named executive officers under
certain medical insurance and other employee benefit plans.
(f) Compensation Committee Interlocks and Insider Participation. Stephen B.
Ashley and William A. Buckingham served during the fiscal year ended April 29,
2000 as members of the Management Continuity Committee of the Corporation's
Board of Directors.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
(a) Security Ownership of Certain Beneficial Owners. The
Corporation's only class of voting securities is its Class A Common Stock. As of
July 14, 2000, persons who owned of record or were known by the Corporation to
own beneficially more than 5% of the outstanding Class A Common Stock were:
<TABLE>
<S> <C> <C>
Percent of
Name and Address Amount Owned Class A Stock
-------------------------------------------------- ------------ -------------
Charles S. Wehle as Trustee 73,845 (1) 35.2%
under the Will of Louis A. Wehle
P. O. Box 762
Rochester, New York 14603
Franklin Resources, Inc. 45,000 21.4%
777 Mariners Island Boulevard
San Mateo, California 94404
Charles S. Wehle and Henry S. Wehle 41,957 (2) 20.0%
P. O. Box 762
Rochester, New York 14603
Charles S. Wehle as Trustee under 12,145 (3) 5.8%
Elizabeth R. Wehle Trust
P. O. Box 762
Rochester, New York 14603
</TABLE>
48
<PAGE>
(1) The power to vote and otherwise act with respect to these shares is vested
in Charles S. Wehle while a trustee. In the event of his death, resignation
or incapacity, such power would pass to Henry S. Wehle.
(2) Excludes shares owned by trusts described elsewhere in this table and
notes. Includes 31,443 shares held by Trust under Will of John L. Wehle,
8,595 shares owned individually by the Estate of John L. Wehle, Jr., 1,890
shares owned individually by Charles S. Wehle and 29 shares owned
individually by Henry S. Wehle. Pursuant to a Shareholder Agreement and
Irrevocable Proxy dated June 22, 1988 (the "Shareholder Agreement") among
John L. Wehle, John L. Wehle, Jr., Charles S. Wehle and Henry S. Wehle (the
"Shareholders"), Charles S. Wehle is appointed proxy to vote all voting
securities of the Corporation then owned or thereafter acquired by the
Shareholders. Under the Shareholder Agreement, Henry S. Wehle would succeed
Charles S. Wehle as proxy in the event of the death, incapacity or
resignation of Charles S. Wehle. The Shareholder Agreement will continue in
effect until terminated in writing signed by all of the surviving
Shareholders. As of July 17, 1998, 41,957 Class A shares, constituting 20%
of the Class A shares outstanding, are subject to the Shareholder
Agreement.
(3) The power to vote and otherwise act with respect to these shares is vested
in Charles S. Wehle while a trustee. In the event of his death, resignation
or incapacity, such power would pass to Henry S. Wehle.
Except as otherwise described above, to the Corporation's knowledge the persons
listed above have sole voting and sole investment power with respect to all
Class A shares listed.
(b) Security Ownership of Management. The number of and percentage
of outstanding shares of Class A and Class B Common Stock of the Corporation
beneficially owned (as determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934) as of July 14, 2000 by each director and by all
directors and officers as a group are set forth in the following table:
<TABLE>
<S> <C> <C> <C> <C>
Shares of Percentage Of Shares of Percentage of
Name of Director Class A Class A Class B Class B
Or Executive Officer Common Stock Common Stock Common Stock Common Stock
-------------------- --------------- ----------------- ---------------- ---------------
Charles S. Wehle 127,947(1) 61.0% 91,203(2)(4)(5) 6.1%
Gary C. Geminn NONE - 11,401(6) (10)
Mark W. Leunig NONE - 8,075(7) (10)
Stephen B. Ashley NONE - 5,000(9) (10)
Karl D. Simonson NONE - 6,875(8)
William A. Buckingham 240 (10) 5,000(3)(9) (10)
Samuel T. Hubbard, Jr. NONE - 19,555(9) 1.4%
All Directors and Executive
Officers as a group (10
persons) 129,187 61.6% 164,142 11.0%
</TABLE>
(1) See Table under Item 12(a) and Notes (1), (2) and (3) thereto.
(2) Includes 40,633 shares held as trustee under the will of Louis A. Wehle.
See Note (1) to table set forth in Item 12(a) above.
(3) Mr. Buckingham serves as trustee of Genesee Country Museum, which holds
37,638 Class B shares, none of which are included in the table above.
49
<PAGE>
(4) Includes 37,090 shares held as trustee under Elizabeth R. Wehle irrevocable
trust dated January 12,1950, the power to act with respect which is vested
in Mr. Wehle as a trustee.
(5) Includes 2,450 shares owned individually and 11,000 shares which may be
acquired pursuant to presently exercisable stock options.
(6) Includes 2,254 shares owned individually and 9,147 shares which may be
acquired pursuant to presently exercisable stock options.
(7) Includes 375 shares owned individually and 7,700 shares which may be
acquired pursuant to presently exercisable stock options.
(8) Includes 375 shares owned individually and 6,500 shares which may be
acquired pursuant to presently exercisable stock options.
(9) Shares which may be acquired pursuant to presently exercisable stock
options.
(10) Amount of shares owned does not exceed one-percent of shares outstanding.
(c) Change of Control Arrangements. A Shareholder Agreement and Irrevocable
Proxy among John L.
Wehle, John L. Wehle, Jr., Charles S. Wehle and Henry S. Wehle dated June 22,
1988 may at a subsequent date result in a change in control of the Corporation,
which agreement is more fully described in Note (2) to Item 12(a).
PART IV
Item 13. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statement Schedule:
See Index to Financial Statements at Page 17 of this report.
Other schedules have been omitted because they are either not applicable or not
required, or the required information is given in the consolidated financial
statements or the notes thereto.
2. Exhibits:
See Exhibit Index at Page 53 of this report.
(b) Reports on Form 8-K.
The Corporation filed a report on Form 8-K on March
23, 2000 to report a change in control of the
Corporation under Item 1. The Corporation filed
reports on Form 8-K on May 2, 2000, May 5, 2000 and
June 29, 2000 to report information under Item 5
(Other Events).
50
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereto duly authorized.
GENESEE CORPORATION
July 27, 2000 By: /s/Samuel T. Hubbard, Jr.
--------------------------- ----------------------------
(Date) Samuel T. Hubbard, Jr., President and
Chief Executive Officer
July 27, 2000 By: /s/John B. Henderson
---------------------------- ---------------------------
(Date) John B. Henderson, Senior Vice
President and Chief Financial
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/Stephen B. Ashley July 27, 2000 Director
-------------------------------------------- ------------------------
Stephen B. Ashley (Date)
/s/William A. Buckingham July 27, 2000 Director
-------------------------------------------- ---------------------------
William A. Buckingham (Date)
/s/ Gary C. Geminn July 27, 2000 Director
-------------------------------------------- ---------------------------
Gary C. Geminn (Date)
/s/ Samuel T. Hubbard, Jr. July 27, 2000 Director
-------------------------------------------- ---------------------------
Samuel T. Hubbard, Jr. (Date)
/s/ Charles S. Wehle July 27, 2000 Director
-------------------------------------------- ---------------------------
Charles S. Wehle (Date)
</TABLE>
51
<PAGE>
SCHEDULE II
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Valuation and Qualifying Accounts
Years ended April 29, 2000, May 1, 1999, and May 2, 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Balance at Transferred Additions Balance
beginning To charged to cost at end
Description of period Disc. Oper. and expenses Deductions of period
------------------------------------- ----------------- ------------------ ------------------------ ----------------- --------------
(Dollars in Thousands)
2000
Allowance for doubtful
receivables $ 478 (300) 88 4 262
Allowance for loss on idle plant
and equipment - - 726 726 -
Allowance for obsolete inventory
150 (19) 173 171 133
----------------- ------------------ --------------------- -------------------- --------------
$ 628 (319) 987 901 395
================= ================== ===================== ==================== ==============
1999
Allowance for doubtful
receivables $ 433 - 100 55 478
Allowance for loss on idle plant
and equipment 634 - - 634 -
Allowance for obsolete inventory
387 - 127 364 150
----------------- ------------------ --------------------- -------------------- --------------
$ 1,454 - 227 1,053 628
================= ================== ===================== ==================== ==============
1998
Allowance for doubtful
receivables $ 408 - 31 6 433
Allowance for loss on idle plant
and equipment 487 - 152 5 634
Allowance for obsolete inventory
198 - 538 349 387
----------------- ------------------ --------------------- -------------------- --------------
$ 1,093 - 721 360 1,454
================= ================== ===================== ==================== ==============
</TABLE>
52
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Number Document Page
3-1 Certificate of Incorporation. 54
3-2 By-Laws as amended in 2000. 57
10-1 1986 Genesee Incentive Bonus Plan, as amended and restated in 1997
(incorporated by reference -- to Exhibit 10-1 to the Corporation's report
on Form 10-K for the fiscal year ended May 2, 1998). --
10-2 1992 Stock Plan as amended in 1999 (incorporated by reference to Exhibit
10-1 to the -- 10-2 Corporation's report on Form 10-Q for the fiscal
quarter ended October 30, 1999). --
10-3 Stock Bonus Incentive Program under 1992 Stock Plan 1997 (incorporated by
reference to Exhibit -- 10-3 to the Corporation's report on Form 10-K for
the fiscal year ended May 2, 1998). --
10-4 Agreement dated August 29, 1994 between the Corporation and J.L. Wehle, Jr. 67
10-5 Agreement dated March 2, 2000 between the Corporation and Mr. J.L. Wehle,
Jr. 70
10-6 Severance Agreement and General Release dated December 15, 1999 between the
Corporation and C.S. Wehle (incorporated by reference to Exhibit 10-1 to
the Corporation's report on Form 10-Q -- for the fiscal quarter ender
January 29, 2000). --
10-7 Employment Agreement dated December 15, 1999 between the Corporation and
Samuel T. Hubbard, Jr. (incorporated by reference to Exhibit 10-2 to the
Corporation's report on Form 10-Q for -- the fiscal quarter ender January
29, 2000). --
10-8 Employment Agreement with M.W. Leunig dated September 2, 1999.
Substantially identical agreements were executed with G.C. Geminn and K.D.
Simonson (incorporated by reference to the -- Exhibit 10-2 to the
Corporation's report on Form 10-Q for the fiscal quarter ended October 30,
1999). --
10-9 Indemnification Agreement with Samuel T. Hubbard, Jr. dated November 14,
1996. Substantially identical agreements were executed with all other
directors and officers of the Corporation. 72
10-10Trust Agreement under the Genesee Corporation Deferred Compensation Plan
(incorporated by reference to Exhibit 10-7 to the Corporation's report on
Form 10-K for the fiscal year ended May 3, 1997). --
21 Subsidiaries of the Registrant 83
</TABLE>
53
<PAGE>
EXHIBIT 3-1
Restated Certificate of Incorporation
Of
The Genesee Brewing Co., Inc.
The undersigned officers of The Genesee Brewing Co., Inc. hereby certify that:
I. The name of the corporation is The Genesee Brewing Co., Inc.
II. The Certificate of Incorporation of the corporation was filed with the
Department of State of the State of New York on July 8, 1932.
III. The Certificate of Incorporation of the corporation, as heretofore amended
and restated, is hereby further amended to effect the following changes:
A. The name of the corporation in Paragraph 1 of the Certificate of
Incorporation is hereby changed to Genesee Corporation.
B. The address in Paragraph 5 of the Certificate of Incorporation to
which the Secretary of State shall mail a copy of any process served
upon him is hereby changed to:
Genesee Corporation
445 St. Paul Street
Rochester, New York 14605
IV. The Certificate of Incorporation, as heretofore amended and restated, and
as further amended and changed hereby, is hereby restated in full to read
as follows:
54
<PAGE>
CERTIFICATE OF INCORPORATION
OF
GENESEE CORPORATION
1. The name of the corporation is Genesee Corporation.
2. The purpose for which the corporation is formed is to engage in any lawful
act or activity for which corporations may be organized under the Business
Corporation Law, and to have and exercise all of the powers conferred by
the laws of New York upon corporations formed under the Business
Corporation Law. The corporation is not formed to engage in any act or
activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or approval
firstbeing obtain.
3. The amount of the corporation's authorized capital stock is two million one
hundred fifty thousand dollars ($2,150,000) and the number and par value of
the shares of which it is to consist shall be four hundred fifty thousand
(450,000) shares of Class A Common Stock of the par value of fifty cents
($.50) per share and three million eight hundred fifty thousand (3,850,000)
shares of Class B Common Stock of the par value of fifty cents ($.50) per
share.
The Class A Common Stock and the Class B Common Stock are entitled to the
same rights, powers and preferences, and there is no distinction between the
them, except that the Class A Common Stock is solely entitled to vote and the
Class B Common Stock has no vote except as provided by law.
4. The principal office of the corporation is to be located in the City of
Rochester, Monroe County, New York.
5. The Secretary of State of the State of New York is hereby designated as the
agent of the corporation upon whom process in any action or proceeding
against it may be served. The post office address to which the Secretary of
State shall mail a copy of any such process served upon him is:
Genesee Corporation
445 St. Paul Street
Rochester, New York 14605
6. Any one or more of the directors may be removed either with or without
cause at any time by vote of the stockholders holding a majority of the
shares of stock outstanding, at any special meeting of such stockholders,
and thereupon the term of the director or directors who shall have been so
removed shall forthwith terminate, and there shall be a vacancy or
vacancies in the Board of Directors to be filled in the manner provided by
law and the by-laws of the corporation.
7. No contract or other transaction between this corporation or any other firm
or corporation shall be affected or invalidated by the fact that any one or
more of the directors of this corporation is or are interested in, or is a
member, director or officer, or are members, directors or officers, of such
firm or corporation, and any director or directors, individually or
jointly, may be a party or parties to or may be interested in any contract
or transaction of this corporation or in which this corporation is
interested; and no contract, act or transaction of this corporation with
any person, firm, corporation or association shall be affected or
invalidated by the fact that any director or directors of this corporation
is a party or are parties to or interested in such contract, act or
transaction, or in any way connected with such person, firm, corporation or
association, and each and every person who may become a director of this
corporation is hereby relieved from any liability that might otherwise
exist, from contracting with this corporation for the benefit of himself,
or any firm, corporation or association in which he may in any way be
interested.
55
<PAGE>
8. A director of the corporation shall not be liable to the corporation or its
stockholders for damages for any breach of duty in such capacity, except to
the extent that such exemption from liability or limitation thereof is not
permitted under the New York Business Corporation Law as the same exists or
may hereafter be amended. Any repeal or modification of the foregoing
provision of this Paragraph 8 shall not adversely affect any right or
protection of a director of the corporation existing hereunder with respect
to any acts or omissions occurring prior to or at the time of such repeal
or modification.
9. The Board of Directors of the corporation shall be classified, with respect
to the time for which each class shall hold office, into three classes, as
nearly equal in number as possible as determined by the Board of Directors.
The first class of directors shall be initially elected to hold office
until the annual meeting of shareholders held in the first year following
the year of their election, the second class shall be initially elected to
hold office until the annual meeting of shareholders held in the second
year following the year of their election, and the third class shall be
elected to hold office until the annual meeting of shareholders held in the
third year following the year of their election. Thereafter, the successors
of the class of directors whose term expires at each annual meeting of
shareholders held in the third year following the year of their election.
IV. The foregoing amendment and restatement of the Certificate of Incorporation
was authorized by the affirmative vote of the Board of Directors of the
corporation followed by the affirmative vote of the holders of a majority
of all outstanding shares of the corporation entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this Certificate
and hereby affirm under penalties of perjury that its contents are true this
18th day of December, 1987.
/s/John L. Wehle, Jr.
John L. Wehle, Jr., President
/s/Robert N. Latella
Robert N. Latella, Secretary
56
<PAGE>
BY-LAWS
OF
GENESEE CORPORATION
Approved March 12, 1968 and amended October 20, 1969, March 10, 1971, March 10,
1975, September 4, 1975, October 21, 1976, August 31, 1977, March 6, 1986,
October 23, 1986, June 4, 1987, September 11, 1987, September 13, 1997, June 17,
1999, October 21, 1999 and March 2, 2000.
Certified to be a true and
correct copy of the By-laws
in effect as of March 2,
2000.
/s/Mark W. Leunig
---------------------------
Mark W. Leunig
Secretary
Dated: March 2, 2000
57
<PAGE>
GENESEE CORPORATION
BY-LAWS
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting: An annual meeting of shareholders for the
election of directors and the transaction of other business shall be held on
such day in the month of October in each year and at such time on such day as
shall be fixed by the Board of Directors of the Corporation not later than 10
days before the meeting.
Section 2. Special Meetings: Special meetings of the shareholders may
be called by the Board of Directors, by the Chairman of the Board of Directors,
and by any person(s) entitled to vote 25% or more of the outstanding shares of
the Corporation's Class A Common Stock. Such meetings shall be held at such time
as may be fixed in the call and stated in the notice of meeting.
(Amended by approval of Shareholders, 10/21/99)
Section 3. Place of Meetings: Meetings of shareholders shall be held at
such place, within or without the State of New York, as may be fixed in the
notice of meeting. Unless otherwise provided by action of the Board of
Directors, all meetings of shareholders shall be held at the office of the
Corporation in Rochester, New York.
Section 4. Notice of Meetings: Notice of each meeting of shareholders
shall be in writing and shall state the place, date, and hour of the meeting and
the purpose or purposes for which the meeting is called.
A copy of the notice of any meeting shall be given, personally, or by
mail, not less than ten or more than fifty days before the date of the meeting,
to each shareholder entitled to vote at such meeting. If mailed, such notice is
given when deposited in the United States mail, with postage thereon prepaid,
directed to the shareholder at his address as it appears0 on the record of
shareholders, or, if he shall have filed with the Secretary of the Corporation a
written request that notices to him be mailed to some other address, then
directed to him at such other address.
Section 5. Inspectors of Election: The Board of Directors, in advance
of any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint two inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability.
58
<PAGE>
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
Section 6. List of Shareholders at Meetings: A list of shareholders as
of the record date, certified by the Secretary or any Assistant Secretary or by
the transfer agent, if any, shall be produced at any meeting of shareholders
upon the request therat or prior thereto of any shareholder. If the right to
vote at any meeting is challenged, the inspectors of election, or person
presiding thereat, shall require such list of shareholders to be produced as
evidence of the right of the persons challenged to vote at such meeting, and all
persons who appear from such list to be shareholders entitled to vote thereat
may vote at such meeting.
Section 7. Qualification of Voters: Every shareholder of record of
Common Stock of the Corporation shall be entitled at every meeting of
shareholders to one vote for every share of Class A Common Stock standing in his
name on the record of shareholders.
Section 8. Quorum of Shareholders: The holders of a majority of the
shares entitled to vote thereatshall constitute a quorum at a meeting of
shareholders for the transaction of any business.
The shareholders present, in person or by proxy, and entitled to vote
may, by a majority of votes cast, adjourn the meeting despite the absence of a
quorum.
Section 9. Vote of Shareholders: Directors shall, except as otherwise
required by law, be elected by a plurality of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote in the election.
Whenever any corporate action, other than the election of directors, is
to be taken by vote of the shareholders, it shall, except as otherwise required
by law, be authorized by a majority of the votes cast at a meeting of
shareholders by the holders of shares entitled to vote thereon.
Section 10. Proxies: Every shareholder entitled to vote at a meeting
of shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
59
<PAGE>
Section 11. Fixing Record Date: For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than fifty nor less than ten days before the date of such meeting,
nor more than fifty days prior to any other action.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Power of Board and Qualification of Directors: The business
of the Corporation shall be managed by the Board of Directors, each of whom
shall be at least twenty-one years of age. Except as to any person who has at
any time served as the chief executive officer or the chief operating officer of
the Corporation, neither a director who has reached the age of 70 nor a director
who is an employee of the Corporation and whose employment terminates for any
reason, shall be eligible for re-election to the Board of Directors.
(Amended by Board of Directors, 3/6/86)
Section 2. Number of Directors: The number of directors constituting
the entire Board of Directors shall be such number as may be fixed from time to
time by vote of a majority of the entire Board of Directors, and until otherwise
fixed by the Board shall be twelve. No decrease in the number of directors shall
shorten the term of any incumbent director.
(Amended by approval of Shareholders, 10/21/76)
Section 3. Election and Term of Directors: The Board of Directors shall
be classified, with respect to the time for which each class shall hold office,
into three classes, as nearly equal in number as possible as determined by the
Board of Directors. The first class of directors shall be initially elected to
hold office until the annual meeting of shareholders held in the first year
following the year of their election, the second class shall be initially
elected to hold office until the annual meeting of shareholders held in the
second year following the year of their election, and the third class shall be
elected to hold office until the annual meeting of shareholders held in the
third year following the year of their election, with the members of each class
to hold office until their successors are elected and qualified. Thereafter, the
successors of the class of directors whose term expires at each annual meeting
of shareholders shall be elected to hold office until the annual meeting of
shareholders held in the third year following the year of their election and
until their successors are elected and qualified.
(Amended by approval of Board of Directors, 9/11/87)
60
<PAGE>
Section 4. Quorum of the Board; Action by the Board: A one-third of the
entire Board of Directors shall constitute a quorum for the transaction of
business, and the vote of the majority of the directors present at the time of
such vote, if a quorum is then present, shall be the act of the Board.
Section 5. Meeting of the Board: An annual meeting of the Board of
Directors shall be held in each year directly after the adjournment of the
annual shareholders' meeting. Regular meetings of the Board shall be held at
such times as may from time to time be fixed by resolution of the Board. Special
meetings of the Board may be held at any time upon the call of the President or
any two directors.
Meetings of the Board of Directors shall be held at such place, within
or without the State of New York, as from time to time may be fixed by
resolution of the Board for annual and regular meetings and in the notice of
meeting for special meetings. If no place is so fixed, meetings of the Board
shall be held at the office of the Corporation in Rochester, New York.
No notice need be given of annual or regular meetings of the Board of
Directors. Notice of each special meeting of the Board shall be given by oral,
telegraphic, or written notice, duly given or sent or mailed to each director
not less than one day before such meeting.
Section 6. Newly Created Directorships and Vacancies: Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors by shareholders without cause may be filled by vote of a majority
of the directors then in office, although less than a quorum exists. A director
elected to fill a vacancy shall be elected to hold office for the unexpired term
of his predecessor.
Section 7. Executive and Other Committees of Directors: The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an Executive Committee consisting of three or
more directors and may designate from among its members other committees each
consisting of two or more directors, and each of which, to the extent provided
in the resolution, shall have all the authority of the Board, except that no
such committee shall have authority as to matters vested solely in the Board by
law.
(Amended by approval of Board of Directors, 10/21/99)
Section 8. Compensation of Directors: The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity.
Section 9. Indemnification of Directors and Officers:
(a) Right to Indemnification. Except as prohibited by law or as
provided in Paragraph (b) below, the Corporation shall indemnify any person
against all reasonable expenses, including attorneys fees, and all judgments,
excise taxes, fines, penalties, amounts paid in settlement and any other
liability paid or incurred by such person in connection with any actual or
threatened claim, action, suit or proceeding, whether civil, criminal,
administrative, investigative, or other, or whether brought by or in the right
61
<PAGE>
of the Corporation or otherwise, in which such person may be involved as a party
or otherwise, by reason of the fact that such person or such person's testator
or intestate is or was a director or officer of the Corporation, or serves or
served in any capacity at the request of the Corporation any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise. To
the maximum extent permitted by law, the Corporation shall make advances of
expenses incurred by such person in connection with any such actual or
threatened claim, action, suit or proceeding prior to final disposition thereof,
provided that the Corporation receives an undertaking by or on behalf of such
person to repay such advances to the extent such person is ultimately found not
to be entitled to indemnification.
(b) Exclusions. No indemnification shall be made to or on behalf of any
person if a judgment or other final adjudication adverse to such person
establishes that either (i) such person's acts were committed in bad faith, or
were the result of active and deliberate dishonesty, and were material to the
action, or (ii) such person gained in fact a financial benefit or other economic
advantage to which such person was not legally entitled.
(c) Indemnification Not Exclusive. The right of indemnification under
this Section 9 shall not be deemed exclusive of any other rights to which
persons seeking indemnification hereunder may be entitled under applicable law,
by agreement or otherwise, and the provisions hereof shall inure to the benefit
of the heirs, beneficiaries and legal representatives of persons entitled to
indemnification hereunder and shall be applicable to actions arising from acts
or omissions occurring before or after the adoption hereof. Persons who are not
directors or officers of the Corporation may be similarly indemnified and
entitled to advancement or reimbursement of expenses to the extent authorized at
any time by the Board of Directors. The Corporation is authorized to enter into
agreements with any of its directors or officers extending rights to
indemnification and advancement of expenses to such person to the fullest extent
permitted by applicable law, but the failure to enter into any such agreement
shall not affect or limit the rights of such person pursuant to this By-Law.
(d) Contract Rights. The right of indemnification under this Section 9
shall be deemed to constitute a contract between the Corporation and the persons
entitled to indemnification and may not, without the consent of such person, be
amended or repealed with respect to any event, act or emission occurring or
allegedly occurring prior to the end of the term of office such person is
serving when such amendment or repeal is adopted.
(Amended by approval of Board of Directors, 6/4/87)
Section 10. Action Without a Meeting: Any action required or permitted
to be taken by the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consents thereto shall be filed with the minutes of the
proceedings of the Board or committee.
(Amended by approval of Board of Directors, 3/10/75)
Section 11. Participation in Board Meeting by Conference Telephone: Any
one or more members of the Board of Directors or any committee thereof may
participate in a meeting of such Board or committee by means of a conference
62
<PAGE>
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
(Amended by approval of Board of Directors, 9/4/75)
Section 12. Director Emeritus: The Board of Directors may from time to
time designate one or more persons to serve as a Director Emeritus of the
Corporation, or to hold such other honorary title as the Board may determine.
Each such designee shall serve at the pleasure of the Board and the rights,
privileges, compensation and other terms of service of each such designee shall
be fixed by resolution of the Board, provided that no such designee shall be
entitled to vote on any action taken by the Board or be counted for purposes of
determining the presence of a quorum of the Board. References in these By-Laws
to directors or to the Board of Directors shall not be deemed to include or
refer to any such designee.
(Added by approval of Board of Directors, 9/13/97)
ARTICLE III
OFFICERS
Section 1. Officers: The Board of Directors, as soon as may be
practicable after the annual election of directors, shall elect a Chairman of
the Board of Directors, a President, one or more Vice Presidents (one of whom
may be designated Executive Vice President), a Secretary and a Treasurer, and
from time to time may elect or appoint such other officers as it may determine.
Any two or more offices may be held by the same person, except the offices of
President and Secretary.
(Amended 10/20/69)
Section 2. Term of Office and Removal: Each officer shall hold office
for the term for which he is elected or appointed, and until his successor has
been elected or appointed and qualified.
Section 3. Powers and Duties: The officers of the Corporation shall
each have such powers and authority and perform such duties in the management of
the property and affairs of the Corporation, as from time to time may be
prescribed by the Board of Directors and, to the extent not so prescribed, they
shall each have such powers and authority and perform such duties in the
management of the property and affairs of the Corporation, subject to the
control of the Board, as generally pertain to their respective offices.
Without limitation of the foregoing:
(a) Chairman of the Board of Directors: The Chairman, who
shall be a Director of the Corporation, shall preside at all meetings of the
Corporation's shareholders and Board of Directors, and shall, if he is not the
63
<PAGE>
Chief Executive Officer, perform such other duties and exercise such other
powers as may from time to time be designated by the Board of Directors.
(Amended 3/2/00)
(b) President: The President shall, in the absence of the
Chairman of the Board, preside at all meetings of the Corporation's shareholders
and Board of Directors, and shall, if he is not the Chief Executive Officer,
perform such other duties and exercise such other powers as may from time to
time be designated by the Board of Directors.
(Amended 3/2/00)
(c) Chief Executive Officer: The Chief Executive Officer, if
any, shall be either the Chairman of the Board or the President, as the Board of
Directors shall from time to time determine, and shall have general powers and
duties of management of the Corporation's business and affairs, subject to the
control of the Board of Directors, and shall perform such duties as may from
time to time be designated by the Board of Directors. The duties of the Chief
Executive Officer shall in the event of his absence or disability be performed
by such other officer as the Board of Directors shall designate.
(Amended 3/2/00)
(d) Executive Vice President: The Executive Vice President, if
any, shall possess such powers and perform such duties as may from time to time
be designated by the Board of Directors.
(Amended 3/2/00)
(e) Vice Presidents: The Board of Directors shall determine
the powers and duties of the respective Vice Presidents and may, in its
discretion, fix such order of seniority among the respective Vice Presidents as
it may deem advisable.
(f) Secretary: The Secretary shall issue notices of all
meetings of shareholders and directors where notices of such meetings are
required by law or these By-Laws, and shall keep the minutes of such meetings.
He shall sign such instruments and attest such documents as require his
signature or attestation and affix the corporate seal thereto where appropriate.
(g) Treasurer: The Treasurer shall have general charge of, and
be responsible for, the fiscal affairs of the Corporation and shall sign all
instruments and documents as require his signature.
(Amended 10/23/86)
Section 4. Records: The Corporation shall keep (a) correct and complete
books and records of account; (b) minutes of the proceedings of the
shareholders, Board of Directors, and any committees of the Board; and (c) a
current list of the directors and officers and their residence addresses.
The Corporation shall also keep at its office in the State of New York
or at the office of its transfer agent or registrar in the State of New York, if
any, a record containing the names and addresses of all shareholders, the number
and class of shares held by each and the dates when they respectively became the
owners of record thereof.
Section 5. Checks and Similar Instruments: All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes and
all acceptances, obligations, and other instruments, for the payment of money,
64
<PAGE>
shall be signed by facsimile or otherwise on behalf of the Corporation by such
officer or officers or agent or agents as shall be thereunto authorized from
time to time by the Board of Directors.
Section 6. Voting Shares Held by the Corporation: Either the President
or the Secretary may vote shares of stock held by the Corporation in other
corporations and may execute for and on behalf of the Corporation proxies for
such purpose.
ARTICLE IV
SHARE CERTIFICATES AND LOSS THEREOF - TRANSFER OF SHARES
Section 1. Form of Share Certificates: The shares of the Corporation
shall be represented by certificates, in such forms as the Board of Directors
may from time to time prescribe, signed by the chairman of the Board if such
there be, or the President or a Vice President and the Secretary or an Assistant
secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the corporation or a facsimile thereof. The signatures of the officers
upon a certificate may be facsimiles if the certificate is counter-signed by a
transfer agent or registered by a registrar other than the Corporation or its
employee. In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of issue.
Section 2. Lost, Stolen, or Destroyed Share Certificates: No
certificate or certificates for shares of the Corporation shall be issued in
place of any certificate alleged to have been lost, stolen, or destroyed, except
upon production of such evidence of the loss, theft, or destruction, and upon
such indemnification and payment of costs of the Corporation and its agents to
such extent and in such manner as the Board of Directors may from time to time
prescribe.
Section 3. Transfer of Shares: Shares of the Corporation shall be
transferable on the books of the Corporation by the registered holder thereof in
person or by his duly authorized attorney, by delivery for cancellation of a
certificate or certificates for the same number of shares, with proper
endorsement consisting of either a written assignment of the certificate or a
power of attorney to sell, assign, or transfer the same or the shares
represented thereby, signed by the person appearing by the certificate to be the
owner of the shares represented thereby, either written thereon or attached
thereto, with such proof of the authenticity of the signature as the Corporation
or its agents may reasonably require. Such endorsement may be either in blank or
to a specified person, and shall have affixed thereto all stock transfer stamps
required by law.
65
<PAGE>
ARTICLE V
Other Matters
Section 1. Corporate Seal: The corporate seal shall have inscribed
thereon the name of the Corporation and such other appropriate legend as the
Board of Directors may from time to time determine. In lieu of the corporate
seal, when so authorized by the Board, a facsimile thereof may be affixed or
impressed or reproduced in any other manner.
Section 2. Amendments: By-Laws of the Corporation may be amended,
repealed or adopted by vote of the holders of the shares at the time entitled to
vote in the election of any directors. By-Laws may also be amended, repealed, or
adopted by the Board of Directors, but any By-Law adopted by the Board may be
amended or repealed by the shareholders entitled to vote thereon as hereinabove
provided.
If any By-Law regulating an impending election of directors is adopted,
amended, or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
By-Law so adopted, amended, or repealed, together with a concise statement of
the changes made.
66
<PAGE>
EXHIBIT 10-4
DEFERRED COMPENSATION AGREEMENT as of the 29th day of August, 1994 by
and between GENESEE CORPORATION, a New York corporation of Rochester, New York
("Company"), and JOHN L. WEHLE, Jr. residing at 2171 Scottsville Road,
Scottsville, New York 14546 ("Wehle").
Wehle has made substantial contributions to Company over a period of
more than 25 years, including as its Chief Executive Officer. In recognition of
that service, to assure his continuing commitment to the Company, and to provide
him with benefits commensurate with his responsibilities as the Company's
Chairman, President and Chief Executive Officer, Wehle and the Company have
agreed to the terms hereof.
NOW, THEREFORE, in pursuance of the foregoing and the promises and
conditions hereinafter set forth, the parties hereto do mutually covenant and
agree with each other as follows:
1. The Company agrees to employ Wehle as its Chief Executive Officer from
the date as of which this Agreement is made for so long as it is
mutually agreed upon between Wehle and the Company, and Wehle agrees
that so long as he continues in the employ of the Company in that
capacity he shall devote his best efforts and such of his business
time and attention to the affairs of the Company as is necessary to
properly fulfill his responsibilities as such Chief Executive Officer.
Wehle's base salary shall be mutually agreed upon from time to time
between himself and the Management Continuity Committee of the Board
of Directors of the Company.
2. Wehle agrees that from and after the date he ceases to be employed as
the Chief Executive Officer of the Company he will serve the Company
as a consultant and the Company hereby agrees to retain the services
of Wehle as such a consultant. Wehle's duties as a consultant shall be
to advise and consult with the management of the Company with respect
to the operations of its several businesses and customers relations,
and to assist the management of the Company in contacts with presently
existing customers of the Company to the extent reasonably requested
so to do by the Company and to develop further contacts and business
for the Company to extent reasonably requested so to do by the
Company. It is agreed that the foregoing consulting services shall in
no way restrict Wehle's movements and that the Company will reimburse
him for out-of-pocket expenses reasonably incurred by him in the
performance of such services for the Company. It is further understood
that from and after the date he ceases to be employed as the Chief
Executive Officer of the Company Wehle will not be considered an
employee, representative or agent of the Company for any purposes and
that he shall have no authority to bind or obligate the Company to
third persons. The Company shall have no control over the manner or
means of Wehle's performance.
3. From and after the date Wehle ceases to be employed by the Company,
whether by reason of death, disability, retirement or otherwise, the
Company shall pay to Wehle Seven Thousand Five Hundred Dollars
($7,500.00) per month for so long as he shall live, provided, however,
that if Wehle shall die prior to having received one hundred twenty
(120) such monthly installments the Company shall pay the remainder of
such installments to the beneficiary or beneficiaries and in the
proportions designated by Wehle under paragraph 8 hereof. If no such
beneficiary is designated, or if Wehle so directs in his designation,
the Company shall pay the "commuted value" of such remaining
installments (as defined in Exhibit A annexed hereto) in one lump sum
to Wehle's estate or such designated beneficiary or beneficiaries.
4. Payment of each monthly installment hereunder while Wehle is alive
shall be subject to the condition that Wehle shall not, without first
67
<PAGE>
having procured the written consent of the Company, directly or
indirectly as a principal, officer, director, stockholder (except as
the owner of less than 5% of the stock of a company whose stock is
publicly traded), partner, employee or in any other capacity
whatsoever, engage in or become associated with, or advise or assist,
any business or enterprise which is engaged in providing any goods or
services that are competitive with any goods or services that are or
may at any time be offered by the Company.
5. Neither Wehle nor his estate shall under any circumstances have any
option or right to require payments hereunder, otherwise than in
accordance with the terms and subject to full compliance with the
conditions herein specified.
6. The Company agrees that if at any time prior to the making of any
payments to be paid to Wehle hereunder it shall liquidate or dissolve,
it shall, to the extent that it may be legally capable of doing so,
before any such liquidation of dissolution, make proper provision for
the continuation of the payments to Wehle or his beneficiary or
beneficiaries as hereinabove set forth. The Company further agrees
that it shall not merge, consolidate with or transfer its assets to
any other corporation unless such corporation shall assume the
Company's obligations under this Agreement.
7. Nothing contained in this Agreement shall in any way affect or
interfere with the right of Wehle to participate in any retirement
plan or in any bonus or other incentive compensation or benefit plan
to which he may now or hereafter be entitled as an officer or employee
of the Company.
8. Wehle shall have the right, by an instrument in writing delivered to
the Company, to name one or more beneficiaries to receive any monies
payable hereunder after his death, the amount payable to each of such
beneficiaries and whether such payment or payments shall be in
continuing installments or in a single lump sum equal to the "commuted
value" of all remaining installments, and to change such beneficiary
or beneficiaries at any time and from time to time. The Company shall
be bound by the designation last filed with it by Wehle.
9. This Agreement shall be binding upon the parties hereto, their heirs,
executors, administrators, successors and assigns.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by the Chairman of the Management Continuity Committee of its Board of Directors
and by its duly authorized officer, and Wehle has hereunto set his hand, as of
the day and year first above appearing.
GENESEE CORPORATION
For The Management Continuity
Committee of the Board of Directors:
/s/Stephen B. Ashley
Stephen B. Ashley, Chairman
For the Corporation:
/s/Robert N. Latella
Robert N. Latella, Executive Vice President
and Chief Operating Officer
/s/John L. Wehle, Jr.
John L. Wehle, Jr.
68
<PAGE>
Definition of Commuted Value
The commuted value of the remaining payments shall equal the present value, as
of the date of payment, of the remaining payments that would have been made had
Wehle not died. In determining the present value, a discount rate equal to the
Treasury Rate plus 100 basis points on the date of payment shall be used, with
semi-annual compounding. The Treasury Rate shall equal the yield-to-maturity of
United Sates Treasury obligations having maturity substantially equal to the
remaining payment period.
69
<PAGE>
EXHIBIT 10-5
AGREEMENT
THIS AGREEMENT is made as of the 2nd day of March, 2000 by and between
Genesee Corporation, a New York Corporation, ("Genesee") and John L. Wehle, Jr.
("Executive").
WHEREAS, Executive has experienced physical disabilities which limit
his active day-to day involvement in Genesee's business ( the "Business"); and
WHEREAS, the Business is at a critical juncture from which its
prospects for a successful future require the designation of a Chief Executive
Officer capable of diligently pursuing the same; and
WHEREAS, the Executive is willing to resign from his position as Chief
Executive Officer and retire; and
WHEREAS, Genesee desires to recognize Executive's substantial
contributions to the growth and success of Genesee and encourage him to retire
to facilitate a transition in management;
NOW, THEREFORE, Genesee and the Executive agree as follows.
1. Employment. The parties hereby agree that Executive shall immediately
and herewith does resign from his position as Chief Executive Officer
of Genesee and retire as an employee.
2. Severance. Executive shall be paid severance of SEVEN HUNDRED THOUSAND
DOLLARS ($700,000) in a lump sum within 10 days.
3. Death Benefit. Upon the death of Executive, Genesee shall pay to his
surviving spouse Patricia Wehle or to Executive's estate if she does not survive
Executive, a death benefit of THREE HUNDRED AND FIFTY THOUSAND DOLLARS
($350,000) in addition to the group term life insurance noted in 4(ii) below.
4. Employee Benefits.
(i) Executive shall continue to participate in the August 29, 1994
Deferred Compensation Agreement pursuant to the terms of that
separate agreement.
(ii) For a period of three (3) years or until his earlier death,
Genesee shall provide Executive with facilities, services and
perquisites no less favorable than those Executive is receiving
from Genesee at the time of the execution of this Agreement
including but not limited to group term life insurance in the
amount of SIX HUNDRED THOUSAND DOLLARS ($600,000).
(iii)Executive shall be entitled to all benefits payable under any
stock option, retirement, profit sharing or similar plans in
which he has a vested benefit pursuant to the provision of those
plans.
(iv) Executive's surviving spouse shall be entitled to receive medical
benefits as the surviving spouse of a retired executive which
benefits shall continue for a minimum of three (3) years from the
date of this agreement.
70
<PAGE>
5. Transferability. The rights and obligations of Genesee under this
Agreement shall enforceable by or against its successors and assigns. Whenever
the term "Genesee" is used in this Agreement, such term shall mean and include
Genesee Corporation and its successors and assigns. The rights and benefits of
Executive under this Agreement shall not be transferable.
6. Waiver. Any waiver of or breach of any of the terms of this Agreement
shall not operate as a waiver of any other breach of such terms or conditions or
any other terms or conditions, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
7. Severability. If any provision of this Agreement or the application
thereof is held invalid or unenforceable, the invalidity or unenforceability
thereof shall not affect any other provisions of this Agreement which can be
given effect without the invalid or unenforceable provision, and to this end the
provisions of the Agreement are to be severable.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York and any action to enforce this
Agreement will be brought in Rochester, New York.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first set forth above.
GENESEE CORPORATION
By: /s/Stephen B. Ashley
Stephen B. Ashley
Chairman of the Management Continuity
Committee
/s/John L. Wehle, Jr.
JOHN L. WEHLE, JR.
71
<PAGE>
EXHIBIT 10-9
INDEMNIFICATION AGREEMENT
Agreement, dated November, 14 1996 between Genesee Corporation, a New York
corporation (the "Company"), and Samuel T. Hubbard, Jr. (the "Indemnitee").
WHEREAS, highly competent persons are becoming more reluctant to serve as
directors and officers of the Company unless they are provided with adequate
protection through insurance or adequate indemnification against inordinate
risks of claims and actions against them arising out of their service to and
activities on behalf of the Company; WHEREAS, the current impracticability of
obtaining adequate insurance and the uncertainties relating to indemnification
have increased the difficulty of attracting and retaining such persons; WHEREAS,
the Board of Directors of the Company has determined that the inability to
attract and retain such persons is detrimental to the best interests of the
Company's stockholders and that the Company should act to assure such persons
that there will be increased certainty of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be so indemnified; and WHEREAS, the
Indemnitee is willing to serve, continue to serve and to take an additional
service for or on behalf of the Company on the condition that the Indemnitee be
so indemnified;
NOW, THEREFORE, the Company and the Indemnitee hereby agree as follows:
ARTICLE I - DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
given:
1.1 "Board" shall mean the Board of Directors of the Company.
1.2 A "Change in Control" shall be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than (a) the Company or (b) any corporation owned, directly or
indirectly, by the Company or the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company), is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities
72
<PAGE>
(provided, however, that none of the direct descendants of John L. Wehle, Sr.,
the trust established under the will of Louis A. Wehle and any trustee
thereunder shall be a "person" for purposes of this Section 1.2);
(ii) during any period of two consecutive years, there is
elected 20% or more of the members of the Board of Directors of Company without
the approval of the nomination of such members by a majority of that portion of
the Board consisting of members who were serving at the beginning of the
two-year period;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (a) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent more than 80% of
the combined voting power of the voting securities of the Company, or such
surviving entity, outstanding immediately after such merger or consolidation; or
(b) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no "person" (as defined above)
acquires more than 20% of the combined voting power of the Company's
then-outstanding securities; or
(iv) the stockholders of the Company approve an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets, including a sale or disposition of Genesee Brewing Co., Inc.
or its assets.
1.3 "Disinterested Director" means a director of the Company who is not and was
not a party to the Proceeding in respect of which indemnification is sought by
the Indemnitee. 1.4 "Expenses" shall include all reasonable attorneys, fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
1.5 "Independent Counsel" means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither presently is, nor in the
past three years has been, retained to represent (i) the Company or the
Indemnitee in any matter material to either such party or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have any conflict of interest in representing either the
Company or the Indemnitee in an action to determine the Indemnitee's rights
under this Agreement. 1.6 "Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative hearing or
any other actual, threatened or completed proceeding, whether civil, criminal,
administrative or investigative, other than, one initiated by the Indemnitee.
73
<PAGE>
For purposes of the foregoing sentence, a "Proceeding" shall not be deemed to
have been initiated by the Indemnitee where the Indemnitee seeks pursuant to
Article VII of this Agreement to enforce the Indemnitee's rights under this
Agreement.
ARTICLE II - SERVICES BY THE INDEMNITEE,
NOTICE OF PROCEEDINGS
2.1 Services. The Indemnitee agrees to continue to serve as a director and/or
officer of the Company. The Indemnitee may at any time and for any reason resign
from such position(s) (subject to any other contractual obligation or any
obligation imposed by operation of law).
2.2 Notice of Proceeding. The Indemnitee agrees promptly to notify the Company
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document or communication relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder; provided, however, that the failure by the
Indemnitee to give such notice, or any delay in giving such notice, shall not
relieve the Company of its obligations under this Agreement except to the extent
that the Company is actually prejudiced by any such failure or delay.
ARTICLE III - INDEMNIFICATION
3.1 In General. In connection with any Proceeding, whether relating to events
occurring before or after the date hereof, the Company shall indemnify, and
advance Expenses, to the Indemnitee as provided in this Agreement and to the
fullest extent permitted by applicable law in effect on the date hereof and to
such greater extent as applicable law may thereafter from time to time permit.
3.2 Proceeding Other Than Proceedings by or in the Right of the Company. The
Indemnitee shall be entitled to the rights of indemnification provided in this
Section if, because the Indemnitee is or was a director or officer of the
Company, the Indemnitee is, or is threatened to be made, a party to any
Proceeding, other than a Proceeding by or in the right of the Company. Subject
to Section 3.1, the Indemnitee shall be indemnified against Expenses, judgments,
penalties, fines and amounts paid in settlement, actually and reasonably
incurred by the Indemnitee or on the Indemnitee's behalf in connection with such
Proceeding. 3.3 Proceedings by or in the Right of the Company. The Indemnitee
shall be entitled to the rights of indemnification provided in this Section if,
because the Indemnitee is or was a director or officer of the Company, the
Indemnitee is, or is threatened to be made, a party to any Proceeding brought by
or in the right of the Company to procure a judgment in its favor. Subject to
Section 3.1, the Indemnitee shall be indemnified against Expenses, judgments,
74
<PAGE>
penalties, fines and amounts paid in settlement, actually and reasonably
incurred by the Indemnitee or on the Indemnitee's behalf in connection with such
Proceeding.
Notwithstanding the foregoing, no such indemnification shall be made in respect
of any claim, issue or matter in such Proceeding as to which the Indemnitee
shall have been adjudged to be liable to the Company if applicable law prohibits
such indemnification or if such claim, issue or matter involves an accounting of
profits by the Indemnitee to the Company pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934, as amended ("Section 16").
3.4 Indemnification of a Party Who is Wholly or Partly Successful.
Notwithstanding any other provision of this Agreement, to the extent that the
Indemnitee is, because the Indemnitee is or was a director or officer of the
Company, a party to and is successful, on the merits or otherwise, in any
Proceeding, the Indemnitee shall be indemnified to the fullest extent permitted
by law, against all Expenses, judgments, penalties, fines, and amounts paid in
settlement, actually and reasonably incurred by the Indemnitee or on the
Indemnitee's behalf in connection therewith. If the Indemnitee is not wholly
successful in such Proceeding but is successful, on the merits or otherwise, as
to one or more but less than all claims, issues or matters in such Proceeding,
the Company shall indemnify the Indemnitee to the fullest extent permitted by
law, against all Expenses, judgments, penalties, fines, and amounts paid in
settlement, actually and reasonably incurred by the Indemnitee or on the
Indemnitee's behalf in connection with each successfully resolved claim, issue
or matter. For purposes of this Section and without limitation, the termination
of any claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.
3.5 Indemnification for Expenses of a Witness. Notwithstanding any other
provision of this Agreement, to the extent that the Indemnitee is, because the
Indemnitee is or was a director or officer of the Company, a witness in any
Proceeding, the Indemnitee shall be indemnified against all Expenses actually
and reasonably incurred by the Indemnitee or on the Indemnitee's behalf in
connection therewith.
ARTICLE IV - ADVANCEMENT OF EXPENSES
Notwithstanding any provision to the contrary in Article V, the Company shall
advance all reasonable Expenses which, because the Indemnitee is or was a
director or officer of the Company, were incurred by or on behalf of the
Indemnitee in connection with any Proceeding, within 10 days after the receipt
by the Company of a statement or statements from the Indemnitee requesting such
advance or advances, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
75
<PAGE>
and shall include or be preceded or accompanied by an undertaking by or on
behalf of the Indemnitee to repay any Expenses if it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified against such
Expenses. Any advance and undertakings to repay pursuant to this Article IV
shall be unsecured and interest free.
ARTICLE V - PROCEDURES FOR DETERMINATION OF ENTITLEMENT
5.1 Initial Request. To obtain indemnification under this Agreement, the
Indemnitee shall submit to the Company a written request, including such
documentation and information as is reasonably available to the Indemnitee and
is reasonably necessary to determine whether and to what extent the Indemnitee
is entitled to indemnification. The Secretary of the Company shall promptly
advise the Board in writing that the Indemnitee has requested indemnification.
5.2 Method of Determination. A determination (if required by applicable law)
with respect to the Indemnitee's entitlement to indemnification shall be made as
follows:
(a) if a Change of Control has occurred, unless the Indemnitee
shall request in writing that such determination be made in
accordance with clause (b) of this Section, the determination
shall be made by Independent Counsel in a written opinion to
the Board, a copy of which shall be delivered to the
Indemnitee.
(b) if a Change of Control has not occurred, the determination
shall be made by the Board by a majority vote of a quorum
consisting of Disinterested Directors. In the event that a
quorum of the Board consisting of Disinterested Directors is
not obtainable or, even if obtainable, such quorum of
Disinterested Directors so directs, the determination shall be
made by Independent Counsel in a written opinion to the Board,
a copy of which shall be delivered to the Indemnitee.
5.3 Selection, Payment and Discharge of Independent Counsel. In the event the
determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to the preceding Section, the Independent Counsel shall be
selected, paid, and discharged in the following manner:
(a) If a Change of Control has not occurred, the Independent
Counsel shall be selected by the Board, and the Company shall
give written notice to the Indemnitee advising the Indemnitee
of the identity of the Independent Counsel so selected. (b) If
a Change of Control has occurred, the Independent Counsel
shall be selected by the Indemnitee (unless the Indemnitee
shall request that such selection be made by the Board, in
which event clause (a) of this Section shall apply), and the
76
<PAGE>
Indemnitee shall give written notice to the Company advising
it of the identity of the Independent Counsel so selected.
(c) Following the initial selection described in clauses (a)
and (b) of this Section, the Indemnitee or the Company, as the
case may be, may, within seven days after such written notice
of selection has been given, deliver to the other party a
written objection to such selection. Such objection may be
asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent
Counsel" as defined in Section 1.5 of this Agreement, and the
objection shall set forth with particularity the factual basis
of such assertion. Absent a proper and timely objection, the
person or firm so selected shall act as Independent Counsel.
If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until
a court has determined that such objection is without merit.
(d) Either the Company or the Indemnitee may petition the
Supreme Court of the State of New York or other court of
competent jurisdiction if the parties have been unable to
agree on the selection of Independent Counsel within 20 days
after submission by the Indemnitee of a written request for
indemnification pursuant to Section 5.1 of this Agreement.
Such petition may request a determination whether an objection
to the party's selection is without merit and/or seek the
appointment as Independent Counsel of a person or firm
selected by the court or by such other person as the court
shall designate. A person or firm so appointed shall act as
Independent Counsel under Section 5.2 of this Agreement.
(e) The Company shall pay any and all reasonable fees and
expenses of Independent Counsel incurred by such Independent
Counsel in connection with its actions pursuant to this
Agreement, and the Company shall pay all reasonable fees and
expenses incident to the procedures of this Section,
regardless of the manner in which such Independent Counsel was
selected or appointed.
(f) Upon the due commencement of any judicial proceeding or
arbitration pursuant to Section 7.2 of this Agreement,
Independent Counsel shall be discharged and relieved of any
further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
5.4 Cooperation. The Indemnitee shall cooperate with the person, persons or
entity making the determination with respect to the Indemnitee's entitlement to
indemnification under this Agreement, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to the Indemnitee and reasonably necessary to such
determination. Any reasonable costs or expenses (including attorneys' fees and
77
<PAGE>
disbursements) incurred by the Indemnitee in so cooperating with the person,
persons or entity making such determination shall be borne by the Company
(irrespective of the determination as to the Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold the
Indemnitee harmless therefrom.
5.5 Payment. If it is determined that the Indemnitee is entitled to
indemnification, payment to the Indemnitee shall be made within ten days after
such determination.
ARTICLE VI - PRESUMPTIONS AND EFFECT OF
CERTAIN PROCEEDINGS
6.1 Burden of Proof. In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that the Indemnitee is entitled to indemnification
under this Agreement if the Indemnitee has submitted a request for
indemnification in accordance with Section 5.1 of this Agreement, and the
Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any determination
contrary to that presumption.
6.2 Effect of Other Proceedings. The termination of any Proceeding or of any
claim, issue or matter therein, by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right of
the Indemnitee to indemnification or create a presumption that the Indemnitee
did not meet any applicable standard of conduct.
6.3 Actions of Others. The knowledge and/or actions, or failure to act, of any
director, officer, agent or employee of the Company shall not be imputed to the
Indemnitee for purposes of determining the right to indemnification under this
Agreement.
ARTICLE VII - REMEDIES OF THE INDEMNITEE
7.1 Application. This Article VII shall apply in the event of a Dispute. For
purposes of this Article, "Dispute", shall mean any of the following
events:
(a) a determination is made pursuant to Article V of this
Agreement that the Indemnitee is not entitled to
indemnification under this Agreement; (b) advance of Expenses
is not timely made pursuant to Article IV of this Agreement;
78
<PAGE>
(c) the determination of entitlement to be made pursuant to
Section 5.2 of this Agreement has not been made within 30 days
after receipt by the Company of the request for
indemnification; (d) payment of indemnification is not made
pursuant to Section 3.5 of this Agreement within 20 days after
receipt by the Company of a written request therefor; or (e)
payment of indemnification is not made within 20 days after a
determination has been made that the Indemnitee is entitled to
indemnification pursuant to Article V of this Agreement.
7.2 Adjudication. In the event of a Dispute, the Indemnitee shall be entitled to
an adjudication in an appropriate court of the State of New York, or in any
other court of competent jurisdiction, of the Indemnitee's entitlement to such
indemnification or advancement of Expenses. Alternatively, the Indemnitee, at
the Indemnitee's option, may seek an award in arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration Association.
The Indemnitee shall commence such proceeding seeking an adjudication or an
award in arbitration within 180 days following the date on which the Indemnitee
first has the right to commence such proceeding pursuant to this Section. The
Company shall not oppose the Indemnitee's right to seek any such adjudication or
award in arbitration. 7.3 De Novo Review. In the event that a determination
shall have been made pursuant to Article V of this Agreement that the Indemnitee
is not entitled to indemnification, any judicial proceeding or arbitration
commenced pursuant to this Article VII shall be conducted in all respects as a
de novo trial, or arbitration, on the merits and the Indemnitee shall not be
prejudiced by reason of that adverse determination or by reason of the absence
of a determination pursuant to Article V. In any such proceeding or arbitration,
the Company shall have the burden of proving that the Indemnitee is not entitled
to indemnification or advancement of Expenses, as the case may be.
7.4 Company Bound. If a determination shall have been made or deemed to have
been made pursuant to Article V of this Agreement that the Indemnitee is
entitled to indemnification, the Company shall be bound by such determination in
any judicial proceeding or arbitration absent (i) a misstatement by the
Indemnitee of a material fact, or an omission of a material fact necessary to
make the Indemnitee's statement not materially misleading, in connection with
the request for indemnification or (ii) a prohibition of such indemnification
under applicable law.
7.5 Procedures Valid. The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Article VII that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
7.6 Expenses of Adjudication. In the event that the Indemnitee, pursuant to this
Article VII, seeks a judicial adjudication of, or an award in arbitration to
enforce the Indemnitee's rights under, or to recover damages for breach of, this
79
<PAGE>
Agreement, the Indemnitee shall be entitled to recover from the Company, and
shall be indemnified by the Company against, any and all expenses (of the types
described in the definition of Expenses in Section 1.4 of this Agreement)
actually and reasonably incurred by the Indemnitee in such adjudication or
arbitration, but only if the Indemnitee prevails therein. If it shall be
determined in such adjudication or arbitration that the Indemnitee is entitled
to receive part, but not all of the indemnification or advancement of expenses
sought, the expenses incurred by the Indemnitee in connection with such
adjudication or arbitration shall be appropriately prorated.
ARTICLE VIII - NON-EXCLUSIVITY, INSURANCE, SUBROGATION
8.1 Non-Exclusivity. The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which the Indemnitee may at any time be entitled under
applicable law, the Certificate of Incorporation or By-Laws of the Company, any
agreement, a vote of shareholders or a resolution of directors, or otherwise. No
amendment, alteration, rescission or replacement of this Agreement or any
provision hereof shall be effective as to the Indemnitee with respect to any
action taken or omitted by the Indemnitee as a director of the Company prior to
such amendment, alteration, rescission or replacement.
8.2 Insurance. The Company may maintain an insurance policy or policies against
liability arising out of this Agreement or otherwise. 8.3 Subrogation. In the
event of any payment under this Agreement, the Company shall be subrogated to
the extent of such payment to all of the rights of recovery of the Indemnitee
who shall execute all papers required and take all action necessary to secure
such rights, including execution of such documents as are necessary to enable
the Company to bring suit to enforce such rights.
8.4 No Duplicative Payment. The Company shall not be liable under this Agreement
to make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that the Indemnitee has otherwise actually unconditionally received such
payment under any insurance policy, contract, agreement or otherwise.
ARTICLE IX - GENERAL PROVISIONS
9.1 Binding Effect. This Agreement shall be binding upon the Company and its
successors and assigns, shall inure to the benefit of the Indemnitee and the
Indemnitee's heirs, executors and administrators and shall continue in effect
regardless of whether the Indemnitee continues to serve as a director of the
Company.
80
<PAGE>
9.2 Severability. If any provision or provisions of this Agreement shall be held
to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation,
each portion of any Section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable,
that is not itself invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the
fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section of
this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid,
illegal or unenforceable.
9.3 Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an original but all of
which together shall constitute one and the same Agreement. 9.4 Headings. The
headings of the paragraphs of this Agreement are inserted for convenience only
and shall not be deemed to constitute part of this Agreement or to affect the
construction thereof. 9.5 Modification and Waiver. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
both of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
9.6 Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if (i) delivered
by hand, or (ii) mailed by certified or registered mail with postage prepaid, on
the third business day after the day on which it is so mailed:
If to the Indemnitee:
--------------------
--------------------
If to the Company:
Attn: The President
445 St. Paul Street
Rochester, New York 14605
or to such other address as may have been furnished to the Indemnitee by the
Company or to the Company by the Indemnitee, as the case may be. 9.7 Governing
81
<PAGE>
Law. The parties agree that this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York without
application of the conflict of law principles thereof.
9.8 Entire Agreement. This Agreement ,constitutes the entire agreement and
understanding between the parties hereto in reference to all the matters herein
agreed upon. This Agreement replaces all prior indemnification agreements or
understandings of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written. COMPANY:
GENESEE CORPORATION
By /s/John L. Wehle, Jr. .
Name: John L. Wehle, Jr.
Title: Chairman, President & Chief Executive
Officer
INDEMNITEE:
/s/Samuel T. Hubbard, Jr. .
82
<PAGE>
EXHIBIT 21
Subsidiaries
Names State of Incorporation
The Genesee Brewing Company, Inc. New York
Genesee Ventures, Inc. New York
Ontario Foods, Incorporated New York
83
<PAGE>
